Best Affirms Fireman’s Fund Ratings, Removes from Review; Outlook Stable

June 7, 2012

A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and the issuer credit ratings (ICR) of “a+” of Fireman’s Fund Insurance Company (FFIC) and its property/casualty affiliates, collectively referred to as Fireman’s Fund Insurance Companies. The outlook assigned to all of the ratings is stable.

The rating actions correspond with the removal from under review and affirmation of the ICR and FSR of the group’s ultimate parent company, Allianz Societas Europaea., which were placed under review in December 2011, due to the company’s exposure to investments in several peripheral euro zone economies, Italy in particular, as well as its investment exposure to euro zone banks.

As Best explained in its bulletin on Allianz SE, the group “continues to maintain sizeable exposure to peripheral euro zone debt as well as euro zone financial institutions. However, the majority of these exposures are Italian sovereign debt backing life reserves, which have significant participatory features.

“Allianz SE’s risk-adjusted capitalization (both stressed and standard basis) remained very strong at year-end 2011 despite significant impairments, and in this context,” Best said it “deems the group’s exposure manageable. In addition, the group holds a significant share of its investments in perceived “safe haven assets” such as German covered bonds and German, UK and U.S. government bonds, which are likely to appreciate in a stressed scenario.”

The ratings of Fireman’s Fund “reflect the group’s strong risk-adjusted capitalization and historically favorable operating performance,” Best explained. The ratings also consider Fireman’s Fund’s “strategic importance to its ultimate parent, Allianz SE, demonstrated by Allianz SE’s explicit and implicit support of Fireman’s Fund’s operations. These positive factors are partially offset by continued adverse loss reserve development and the deterioration of underwriting performance in recent years.

“While the rating outlook for Fireman’s Fund is stable, future positive rating actions may result if the group outperforms its peers for an extended period of time or if Best determines that additional rating enhancement can be afforded by Allianz SE.

“Negative rating actions could result if operating performance falls markedly short of A.M. Best’s expectations, if there is a considerable deterioration in risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio or if there is a diminution in the group’s strategic importance to Allianz SE.”

Best summarized the companies affected by its rating actions as follows:
It has affirmed the FSR of ‘A’ (Excellent) and ICR of “a+” of Fireman’s Fund Insurance Company and its following intercompany pool participants and reinsured affiliates:
— American Automobile Insurance Company
— National Surety Corporation
— The American Insurance Company
— American Standard Lloyd’s Insurance Company
— Associated Indemnity Corporation
— Chicago Insurance Company
— Fireman’s Fund County Mutual Insurance Company
— Fireman’s Fund Indemnity Corporation
— Fireman’s Fund Insurance Company of Hawaii, Inc.
— Fireman’s Fund Insurance Company of Louisiana
— Fireman’s Fund Insurance Company of Ohio
— Interstate Fire & Casualty Company

Source: A.M. Best

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