Ratings Recap: Lititz, Integon, Maiden, AmTrust, MLBA Mutual

June 15, 2011

A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A+ (Superior) and issuer credit rating of “aa-” of Lititz Mutual Insurance Pool, which includes the operations of Lititz Mutual Insurance Company and its three reinsured affiliates: Farmers’ and Mechanics’ Mutual Insurance Company, Livingston Mutual Insurance Company and Penn Charter Mutual Insurance Company. All of the companies are domiciled in Lititz, Penna. Best explained that the revised outlook “reflects the trend in Lititz’s underwriting losses over several years caused by an increase in the frequency and severity of weather-related and catastrophe events in its operating territories. As a result, Lititz’s five- and ten-year average operating performance declined to a level that lags the industry composite, and the risk-adjusted capitalization, while very strong, declined from historical levels.” However, Best added that “despite this, Lititz’s policyholders’ surplus increased 5.8 percent driven by strong investment performance in 2010. Best noted that the outlook revision also reflects its “prospective viewpoint that Lititz’s operating results will likely continue to trend unfavorably in the near term as the impact of severe weather patterns will continue to affect the organization, as has already been evident through the first half of 2011. Despite the negative outlook, Lititz’s ratings recognize its strong risk-adjusted capitalization driven by low underwriting leverage and favorable loss reserve development, solid liquidity position and market presence among its long-standing independent agents.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of Integon National Group’s 10 pooled affiliated companies, which has as its lead company, Integon National Insurance Company of Winston-Salem, NC. The outlook for all ratings is stable. The ratings of the group reflect its “solid capitalization, the historically profitable operating performance of GMAC Insurance’s personal lines book of business and its well established market presence,” said Best. “Additionally, the ratings acknowledge the operational benefits that the group derives as a quota share partner with AmTrust Financial Services, Inc., Maiden Reinsurance Company and a Bermudian affiliated company.” As partial offsetting factors Best cited “the execution risk faced by the group’s management in achieving its business plans and the risks inherent in profitably growing business amidst challenging market conditions.” However, Best also indicated that despite these concerns, “the outlook recognizes the group’s historically strong operating performance and experienced management team. Both the group’s ratings and outlook remain largely dependent on management’s ability to meet projected underwriting targets while maintaining sufficient capital in each entity to support its business plans.” Best summarized the ratings affected as follows: The FSR of A- (Excellent) and ICR of “a-” have been affirmed for the following 10 pooled affiliated companies of Integon National Group:
* Integon General Insurance Corporation
* National General Insurance Company
* National General Assurance Company
* GMAC Insurance Company Online, Inc.
* MIC General Insurance Corporation
* Integon National Insurance Company
* Integon Preferred Insurance Company
* Integon Indemnity Corporation
* Integon Casualty Insurance Company
* New South Insurance Company

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit ratings of “a-” of Bermuda-based Maiden Insurance Company Ltd.(MIC), Maiden Reinsurance Company (MRC), based in Maryland Heights, Mo. and its wholly owned subsidiary, Maiden Specialty Insurance Company (MSIC) in Raleigh, NC, all of which operate through an intercompany quota share reinsurance agreement. Best also affirmed the ICR of “bbb-” of the parent holding company, Bermuda-based Maiden Holdings, Ltd. The outlook for all of the ratings is stable. The ratings of the group reflect its “solid risk-adjusted capitalization achieved through capital contributions from Maiden Holdings and the operational benefits that MIC derives as a quota share partner with AmTrust Financial Services, Inc.’s (AFSI) Bermuda reinsurance subsidiary, AmTrust International Insurance, Ltd., (AII) and American Capital Acquisition Corporation (ACAC),” Best explained. In addition, the ratings reflect MRC and MSIC’s strategic importance to Maiden Holdings as a dedicated U.S. reinsurance platform providing treaty, accident and health and specialty facultative reinsurance. As partial offsetting factors, Best noted the “execution risk faced by the group’s management in achieving its business plans and integrating newer business. Despite these concerns, MIC’s outlook is supported by the financial commitment of Maiden Holdings, its seasoned management team and the dedicated distribution MIC, MRC and MSIC shares with AFSI and ACAC.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of the New York- based AmTrust Group and its property/casualty members, which operate through an intercompany quota share reinsurance arrangement with AmTrust International Insurance, Ltd. (AII). The outlook for all ratings is stable. The rating actions reflect AmTrust’s “strong balance sheet strength, sustained strong operating performance within its niche market segments and the benefits derived from AmTrust Financial Services, Inc. (AFSI), including AFSI’s commitment to maintain sufficient capital and to provide access to additional capital should it be needed to support AmTrust’s expanding operations,” said Best. The analysis also noted that “AmTrust has been successful in executing its business plan, which is focused on growth through acquisition of renewal rights offerings and established books of business at appropriate rates, terms and conditions. This allows AmTrust to further benefit from its expandable underwriting platform that generates significant expense savings.” As partial offsetting factors Best cited AmTrust’s “continued growth in both premium volume and associated liabilities in recent years, primarily achieved through renewal rights transactions and the inherent risk associated with expansion into new markets and integrating new business. However, Best said that despite these concerns, “the outlook recognizes AmTrust’s strong sustained operating results within its market segments, its ongoing access to capital and commitment to prudent underwriting through its proven business platform. Best summarized the companies affected by the rating actions as follows: The FSR of ‘A'(Excellent) and ICR of “a” have been affirmed for the AmTrust Group and its following property/casualty members:
* AmTrust International Insurance, Ltd.
* Technology Insurance Company, Inc.
* Rochdale Insurance Company
* Wesco Insurance Company
* Milwaukee Casualty Insurance Company
* Security National Insurance Company
* AmTrust Insurance Company of Kansas
* AmTrust Lloyd’s Insurance Company of Texas
* AmTrust International Underwriters Limited
* AmTrust Europe Limited
* Associated Industries Insurance Company, Inc.

A.M. Best Co. has revised the outlook to negative from stable and affirmed the issuer credit rating (ICR) of “bbb+” of Michigan-based MLBA Mutual Insurance Company. Best also affirmed the financial strength rating (FSR) of ‘B++’ (Good) of MLBA. The outlook for the FSR is stable. The revised ICR outlook “reflects the recent deterioration in MLBA’s underwriting results due primarily to its expense ratio disadvantage, which is a result of the shrinking premium base that is driven by the company’s narrow business scope and the prevailing competitive and economic conditions in Michigan,” Best explained. The outlook also “recognizes the risks and variability associated with MLBA’s expansion into other product lines to complement its liquor liability product offering, and more specifically, the workers’ compensation line that was written from 2003 to 2009. However, Best said that despite the revised ICR outlook, “the FSR has been affirmed with a stable outlook, which recognizes MLBA’s low underwriting leverage, expense reduction initiatives and sustained profitability in its core liquor liability line of business.”

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