FEBRUARY 07, 2012 12:00 AM (EST)
A.M. Best Downgrades and Places Ratings of Ullico Casualty Company Under Review With Negative Implications
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Assistant Vice President
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Senior Manager, Public Relations
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Assistant Vice President, Public Relations
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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - FEBRUARY 07, 2012 12:00 AM (EST)
A.M. Best Co. has downgraded the financial strength rating to B (Fair) from B+ (Good) and issuer credit rating to bb+ from bbb- of Ullico Casualty Company (Ullico Casualty) (headquartered in the District of Columbia), placing both ratings under review with negative implications.
These actions reflect the myriad of challenges brought on by the change in Ullico Casualtys fronting partner, the recent change in leadership with the departure of its senior management team, the wind-down of its substantial non-core program business and the adverse reserve development associated with this business. The run off of Ullico Casualtys non-core business also brings into question the potential for future adverse reserve development on this discontinued business and the additional collateral to support these reserves.
These actions stem from a notice of termination issued to Ullico Casualty by its fronting partner, Hudson Insurance Company, and the business uncertainties related to this event prior and subsequent to its effective termination. The rating actions also take into account any additional (collateral) costs and fees associated with its new fronting relationship with State National Insurance Company, Inc. (State National) (which had a fronting relationship with Ullico Casualty prior to Hudson Insurance Company), as well as any attrition caused by this change.
According to management, Ullico Casualty has fully executed agreements as of February 1, 2012 with its former fronting partner, State National. At the same time, management has received approval for its newly established risk purchasing group, which is being used to cover those states that require 90-day regulatory approvals for rates and forms. Ullico Casualtys ratings will remain under review pending a meeting with management and resolution of these issues.
The methodology used in determining these ratings is Bests Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bests rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: Risk Management and the Rating Process for Insurance Companies; Understanding BCAR for Property/Casualty Insurers; and Rating Members of Insurance Groups. Bests Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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