JANUARY 23, 2013 12:00 AM (EST)

A.M. Best Affirms Ratings of JRG Reinsurance Company, Ltd. and Certain Affiliates

Greg Williams
Managing Senior Financial Analyst
(908) 439-2200, ext. 5815

Joseph Roethel
Assistant Vice President
(908) 439-2200, ext. 5630

Rachelle Morrow
Senior Manager, Public Relations
(908) 439-2200, ext. 5378

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644


OLDWICK, N.J. - JANUARY 23, 2013 12:00 AM (EST)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of "a-" of JRG Reinsurance Company, Ltd. (JRG Re) (Hamilton, Bermuda) and its U.S. affiliates, James River Insurance Company (JRIC) (Columbus, OH), James River Casualty Company (Richmond, VA) and Stonewood Insurance Company (Stonewood) (Raleigh, NC). The outlook for these ratings is stable.

The rating affirmations of JRG Re reflect its strong risk-adjusted capitalization, experienced management team and solid business profile. The ratings also reflect the earnings prospects from the company's efforts to gradually grow its third-party working layer reinsurance business from U.S.-based specialty insurers to supplement its business that is derived from significant quota share reinsurance agreements with its onshore affiliates.

These positive rating factors are partially offset by the challenges presented by the competitive, prevailing casualty reinsurance market and the recent deterioration in its underwriting results as a result of workers’ compensation and assumed crop reinsurance losses.

The outlook reflects A.M. Best's belief that the profitability of the affiliated business portfolio can be sustained in the current market given the strength of its excess and surplus lines operations, along with the remedial actions management has taken on the workers’ compensation book at Stonewood. JRIC also has stopped assuming crop business, which will remove a source of volatility and losses that has been evident in JRG Re’s recent underwriting results.

A.M. Best also has downgraded the FSR to A- (Excellent) from A (Excellent) and the ICRs to “a-” from “a” of JRG Re’s remaining U.S. affiliates, Stonewood National Insurance Company (Stonewood National) and Stonewood General Insurance Company (Stonewood General). These ratings have been removed from under review with negative implications and assigned a stable outlook. The ratings for Stonewood National and Stonewood General were placed under review following the announcement that James River Group, Inc. would acquire these companies as shells from Infinity Insurance Company. The companies above are domiciled in Columbus, OH.

The rating actions taken on the organization’s U.S. affiliates are based upon A.M. Best’s group rating methodology and consider the roles and strategic importance of the affiliates to the entire organization. The ratings also reflect the explicit support provided by JRG Re in the form of significant quota share reinsurance and the implied commitment provided by JRG Re in the future. Effective January 1, 2013, all U.S. affiliates participate in an intercompany pooling agreement and 70% of the pool’s net business is then ceded to JRG Re. Collectively, the pool maintains solid capitalization, has produced strong operating results and will continue to comprise the majority of the premiums of JRG Re.

While JRG Re is well positioned at its current rating level, positive rating actions could take place if risk-adjusted capital remains strong and underwriting profitability is restored and sustained. Conversely, negative rating actions could occur if JRG Re’s operating performance, and consequently, risk-adjusted capitalization falls below A.M. Best’s expectations. The U.S. affiliates’ ratings receive full rating enhancement due to the explicit and implicit support provided by JRG Re; and therefore, are directly correlated to the ratings of JRG Re.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Catastrophe Analysis in A.M. Best’s Ratings”; “Rating Members of Insurance Groups”; “Risk Management and the Rating Process for Insurance Companies” and “Understanding BCAR for Property/Casualty Insurers.”; and “Understanding Universal BCAR.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.

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