Best Removes Balboa Insurance and Members Ratings from ‘Under Review’

October 11, 2011

A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating of ‘A’ (Excellent) and the issuer credit ratings of “a” of Balboa Insurance Group and its property/casualty members, Balboa Insurance Company, Meritplan Insurance Company, both domiciled in Irvine, Calif., and Newport Insurance Company of Phoenix, Ariz.

All of the companies are owned by the BA Insurance Group, Inc., which is ultimately owned by Bank of America Corporation (BAC). The outlook assigned to all of the ratings is stable.

Best said its affirmation of Balboa’s ratings “reflects its solid risk-adjusted capitalization, strong underwriting profitability and the distribution support it derives from being owned by BAC, as well as the contractual support it garners from the entities of QBE Holdings, Inc. (QBE), as the purchaser of Balboa’s book of business.

As partial offsetting factors Best cited Balboa’s “significant aggregate exposure to catastrophe losses and the transfer of its book of business over the next few years to QBE.” Best also indicated that Balboa “continues to see substantial growth in its lender-placed business through large national independent financial institutions. However, from a business profile perspective, it highlights the group’s dependency upon BAC and other financial institutions for production of its business.”

Best added that “with the recent sale of the assets and liabilities of the members of Balboa, the group has contractual agreements from BAC and QBE for all the services and support it will need to fully service its policyholder base over the book’s transfer period, as QBE continues to develop its elaborate systems to support the demands of the lender-placed business.

“Until the book of business is actually transferred to QBE, Balboa will continue to function on a direct basis; however, the business will now be 100 percent ceded to QBE Insurance Corporation.

“All of Balboa’s structures, which previously have produced excellent results, remain in place, as does its capital base. The assurance that QBE will provide all of the needed support structures until the transition of the business to QBE is completed, per the terms of the purchase of Balboa’s book of business, further enhances A.M. Best’s expectation that Balboa will continue to produce profitable results.”

Source: A.M. Best

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