Ratings Recap: Washington Casualty, Western, One Beacon (notes)

A.M. Best Co. has upgraded the financial strength rating to ‘A-‘ (Excellent) from ‘B+’ (Good) and issuer credit rating to “a-” from “bbb-” of Washington Casualty Company (WCC), both with stable outlooks. The rating upgrades for WCC are based on the “operational benefits that the company derives as a quota share reinsurance partner with MHA Insurance Company, and both companies are indirect subsidiaries of Medical Professional Mutual Insurance Company (ProMutual),” Best explained. Additional factors supporting the ratings are “WCC’s leadership position in the hospital professional liability market in Washington, long-term member retention and the continued support for its members through strong patient safety and risk management programs.” As partial offsetting factors Best cited “the market risks inherent within the medical professional liability insurance sector including tort reform, price competition and regulatory trends. The outlook is based on WCC’s ability to maintain excellent underwriting results across jurisdictions.”

A.M. Best Co. has downgraded the financial strength rating to ‘B’ (Fair) from ‘B++’ (Good) and the issuer credit ratings to “bb” from “bbb” of Nevada-based Western Insurance Company (WIC) and Western Bonding Company (WBC). The outlook for all of the ratings is negative. The ratings of WIC “reflect its weakened risk-adjusted capitalization, continued exposure to contractors in the troubled economies of California and Nevada and loss of its Treasury listing (T-listing) on July 1, 2011,” Best explained. “The loss of the T-listing will preclude WIC from writing bonds for federal construction projects. In addition, there is uncertainty over WIC’s loss reserve adequacy, as well as a concentration of loans to contractors that are mostly collateralized by illiquid real estate.” As a more positive factor Best noted the company’s “successful entry into bail bonds with a partnership involving Two Jinn, Inc., in California.” Best said its ratings of WBC reflect its “strong balance sheet with no debt and T-listing, which will allow the company to write federal surety bonds.” However, as offsetting factors Best cited “the company’s limited scope of operations, including geographic and product concentrations, limited distribution sources and minimal premium volume. In addition, the issues at WIC may indirectly impact WBC should WIC’s financial condition place undue strain on the capitalization and liquidity of the parent holding company, A and H Insurance, Inc., which could in turn put pressure on WBC.” Best also explained that the negative outlook reflects its “concern that management will be challenged in the near term to improve the balance sheet strength and operating performance of WIC, as well as the execution risk in developing WBC’s business profile and ability to attract profitable business.”

A.M. Best Co. has assigned indicative ratings of “bbb” on senior debt, “bbb-” on subordinated debt and “bb+” on preferred stock and trust preferred securities of Bermuda-based OneBeacon Insurance Group, Ltd. and Delaware-based OneBeacon U.S. Holdings, Inc.’s recently filed $1 billion universal shelf registration. The outlook assigned to these ratings is stable. “OneBeacon, Ltd. is the ultimate holding company of OneBeacon U.S. Holdings,” Best noted. “White Mountain Insurance Group, Ltd. owns 76 percent (as of March 31, 2011) of OneBeacon, Ltd. The indicative ratings reflect the modest financial leverage of OneBeacon, Ltd., which has debt-to-total capital of 24.8 percent as of March 31, 2011. The operating companies of OneBeacon, Ltd. are consolidated under OneBeacon Insurance Group. Currently, OneBeacon Group’s financial strength rating of ‘A’ (Excellent) and issuer credit ratings of “a” are based on its sound risk-adjusted capitalization and strong earnings through its favorable underwriting and operating performance.

Topics Washington