A.M. Best Co. has affirmed the financial strength rating of ‘B+’ (Good) and issuer credit rating of “bbb-” of Indiana Lumbermens Mutual Insurance Company and its reinsured subsidiaries, Lone Star National Insurance Company and National Building Material Assurance Company. All of the companies are domiciled in Indianapolis, Indiana. Best has also revised its outlook for all of the ratings to negative from stable. “The negative outlook reflects ILM’s poor underwriting results over the recent five-year period and Best’s expectations for continued losses over the near term,” the report explained. The negative outlook “also reflects further capital erosion through 2012 as ILM continues to face competitive market conditions, a still challenging macroeconomic environment impacting businesses within its niche and on-going exposure to property and weather-related losses.” Best explained that while “ILM’s risk-adjusted capitalization supports its current ratings, continuing expense ratio pressures have adversely impacted the group’s operating performance in recent years. Other factors contributing to underwriting losses include an accumulation of weather-related losses and areas of adverse loss reserve development in select accident years. Although management has implemented several strategic initiatives to improve the group’s underwriting performance in recent years, the execution of ILM’s business plan has yet to materialize into profitable results.” Best said it had affirmed the ratings as a reflection of “ILM’s supportive capitalization and strong niche market presence as a provider of insurance coverages to the building materials and manufacturing industries. The ratings also recognize management’s initiatives to improve the group’s underwriting performance in recent years, specifically exiting the workers’ compensation line of business, a long troublesome line, and aggressively non-renewing unprofitable property business. Finally, the ratings recognize the added balance sheet protection provided by various aggregate stop-loss reinsurance agreements, which helps lessen the impact from severe underwriting losses in a given year. Should ILM’s operating losses exceed A.M. Best’s expectations and/or if capitalization deteriorates further, negative rating actions would likely occur.”
A.M. Best Co. has affirmed the financial strength rating of ‘A+’ (Superior) and issuer credit rating of “aa-” to Vermont-based Noble Assurance Company, both with stable outlooks. “Noble has exhibited strong capital adequacy, stable earnings and consistent surplus growth,” Best said. “The company benefits from intensive risk management processes as a captive insurance company for Royal Dutch Shell plc and its subsidiaries. 100 percent of the risk taken by Noble is ceded to Solen Versicherungen AG (Solen), a subsidiary of Shell Petroleum N.V. and ultimately Royal Dutch Shell plc. Solen is well capitalized and has demonstrated consistently strong metrics over the past few years. Noble’s ultimate parent is Royal Dutch Shell plc.”
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