Ratings Roundup: Nonprofits Alliance, Infinity, Partners Mutual

November 7, 2011

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit ratings of “a” of the Nonprofits Insurance Alliance Group members, Alliance of Nonprofits for Insurance, Risk Retention Group (ANI), National Alliance of Nonprofits for Insurance (NANI) (both domiciled in Montpelier, Vermont) and Nonprofits’ Insurance Alliance of California, Inc. (NIAC). The outlook for all of the ratings is stable. The ratings recognize the group’s “excellent capitalization and operating performance, its strong management and effective niche market strategy,” Best explained. The ratings also consider the benefits derived from and the companies’ strategic roles within the Nonprofits Insurance Alliance Group, including the national platform provided by ANI. Best said it considers that “ANI, NANI and NIAC function as a group, with the common mission of serving nonprofit organizations through common management (human resources, information technology and administration), underwriting, marketing, claims and risk management services provided by Alliance Member Services.” In addition Best said the despite the lack of ownership, it “expects the respective boards of directors would act to support all entities within the group.” As a result, Best explained that it has “deviated from its “Rating Members of Insurance Groups” rating methodology in regard to the lack of common ownership among the group members.” As partial offsetting factors, Best cited “ANI, NANI and NIAC’s limited sizes and the challenges associated with managing a growing book of business, their geographical expansions and establishing market positions in the face of competition. NIAC and ANI provide a range of liability coverages to 501(c)(3) nonprofit organizations—NIAC in California and ANI in other states. NANI provides property coverages for nonprofit organizations insured by ANI and NIAC through a fronting arrangement. Despite significant business growth in the last five years, the companies have been able to maintain conservative leverage measures.” Best also noted that the “companies’ capitalization levels are protected by solid reinsurance protection from a leading global reinsurance group and are supported by conservative reserving and investment approaches. In addition, all three benefit from their nonprofit, tax-exempt status and from the experience and success of NIAC, which has a leading market position serving California nonprofits. This success reflects the group’s expertise, strong customer focus and commitment to the nonprofit sector, as member retentions are very high.”

A.M. Best Co. has placed under review with negative implications the financial strength rating of A (Excellent) and issuer credit ratings (ICR) of “a” of Infinity Specialty Insurance Company and Infinity General Insurance Company, following the announcement that Infinity Insurance Company has entered into a definitive agreement to sell Infinity Specialty and Infinity General to James River Group, Inc., which is based in Delaware. All the above companies are headquartered in Birmingham, Alabama, unless otherwise specified. The placing of the ratings under review with negative implications mainly “reflects that Infinity Specialty and Infinity General are being sold to an insurance group whose current ICR of “a-” is lower than the current ICR for the two companies,” Best explained. The definitive agreement was executed on October 27, 2011, and the transaction is expected to close by year-end 2011, following the receipt of regulatory approval. Infinity Specialty and Infinity General are wholly-owned subsidiaries of Infinity, whose ultimate parent is Infinity Property & Casualty Corporation. James River, Inc. is a holding company whose ultimate parent is Franklin Holdings (Bermuda), Ltd. James River, Inc.’s insurance affiliates are JRG Reinsurance Company, Ltd., James River Insurance Company, Stonewood Insurance Company and James River Casualty Company.

A.M. Best Co. has placed under review with positive implications the financial strength rating (FSR) of ‘C++’ (Marginal) and issuer credit rating (ICR) of “b” of Partners Mutual Insurance Company, based in Waukesha, Wisconsin, following the recent announcement by Pennsylvania National Mutual Casualty Insurance Company that it has executed a definitive agreement to affiliate with Partners. Best also noted that “subsequent to the planned affiliation, Partners is expected to be added into Penn National’s current pooling agreement and become a member of the pool, effective January 1, 2012. Currently, Penn National and its members have an FSR of ‘A-‘ (Excellent) and ICRs of “a-” with a stable outlook. The transaction is expected to close by year-end 2011, pending customary closing conditions and approval by regulatory authorities. Partners’ ratings will be removed from under review following the addition of the company to Penn National’s pool and Best’s discussions with management. Partners, a regional property/casualty insurance company, will continue to operate as a separate entity writing commercial and personal lines in Wisconsin, Michigan and Iowa. Partners will be joining a larger, more diversified insurance group, which will result in greater economies of scale and product enhancements for the company.

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