A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of Harleysville Insurance and its property/casualty pooling members, including the lead company, Harleysville Mutual Insurance Company.
Best also affirmed the FSR of ‘A-‘ (Excellent) and ICR of “a-” of Harleysville Life Insurance Company, a direct life & health subsidiary of Harleysville Mutual. As well as the ICR of “bbb” and debt rating of “bbb” of the 46 percent publicly traded downstream holding company, Harleysville Group Inc. (HGIC). The outlook for all ratings is stable.
The ratings reflect Harleysville’s “excellent level of risk-adjusted capitalization, sound operating performance over the long term and strong regional market franchise,” Best explained. The group also benefits from the financial flexibility afforded through HGIC.
As partial offsetting factors Best cited Harleysville’s “consolidated pre-tax return on revenue measures, which slightly trail the commercial casualty composite over the long term. This is reflective of variability in the company’s reported underwriting income given its exposure to weather-related events, as well as the near-term challenges associated with the highly competitive property/casualty environment and ongoing soft market conditions.”
However, Best also noted that Harleysville’s positive attributes “reflect its focused underwriting discipline, commitment to conservative reserving and prudent management of catastrophe exposures. The group also benefits from strong name recognition and a solid market presence. The ratings also acknowledge the benefits derived from the group’s predictive modeling initiatives, which should enhance results going forward. With the exception of Harleysville Pennland Insurance Company, which is 100 percent owned by Harleysville Mutual, HGIC directly owns all remaining property/casualty members of the group. HGIC’s financial leverage of debt-to-total capital remains modest at approximately 13 percent at year-end 2010.”
Best said the rating affirmations of Harleysville Life acknowledge its “strategic position within the group, adequate risk-adjusted capitalization for its current ratings and its strategy of providing a diversified portfolio of life insurance and related employee benefits products and services to the group’s core business markets.
However, as partial offsetting factors Best pointed to “Harleysville Life’s operating losses due to statutory strain from new business and related declines in its reported statutory capital, which were offset by a capital contribution in recent years. The outlook reflects the ongoing explicit and implicit support of Harleysville Mutual to maintain adequate levels of capitalization within Harleysville Life’s operations.”
Best summarized the companies affected by the rating s announcement as follows:
The FSR of ‘A’ (Excellent) and ICRs of “a” have been affirmed for Harleysville Insurance and its following property/casualty members:
* Harleysville Mutual Insurance Company
* Harleysville Insurance Company of New York
* Harleysville Worcester Insurance Company
* Harleysville-Atlantic Insurance Company
* Harleysville Insurance Company of New Jersey
* Harleysville Insurance Company of Ohio
* Harleysville Insurance Company
* Harleysville Lake States Insurance Company
* Harleysville Preferred Insurance Company
* Harleysville Pennland Insurance Company
The following debt rating has been affirmed:
Harleysville Group Inc.—
— “bbb” on $100 million 5.75 percent senior unsecured notes, due 2013
Source: A.M. Best
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