CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK - JANUARY 05, 2015 04:08 PM (EST)
A.M. Best has placed under review with positive implications the issuer credit rating (ICR) of "bb" of Meadowbrook Insurance Group, Inc. (MIGI) (Southfield, MI) [NYSE: MIG]. Concurrently, A.M. Best has also placed the financial strength rating of B++ (Good) and the ICRs of "bbb" under review with positive implications for the operating subsidiaries of MIGI, which operate under an intercompany reinsurance pooling agreement.
The rating actions follow the recent announcement that Fosun International Limited (Fosun) [HKEx stock code: 00656], together with its subsidiaries, entered into a definitive agreement to acquire MIGI for $8.65 per share in cash, representing an aggregate transaction value of $433.0 million. Upon the close of the transaction, which is expected to occur during the second half of 2015, approximately $100.0 million in outstanding convertible debt of MIGI is expected to be retired. In addition, MIGI is expected to be delisted and become an intermediate holding company owned by Fosun. The company will, however, continue operating under the Meadowbrook brand name. The ratings will remain under review pending the completion of the transaction, which is subject to the approval of MIGI's shareholders and customary regulatory approvals.
The under review status reflects A.M. Best's view that MIGI will benefit from a stronger balance sheet, enhanced liquidity, and improved overall earnings prospects considering the elimination of costs related to being a public company. As a consequence, the insurance subsidiaries of MIGI will benefit from lesser dividend demands to service holding company debt.
While the transaction is considered to be a net positive for MIGI and its subsidiaries, it does not necessarily enhance the execution of the operating subsidiaries, particularly in respect to concerns related to adverse prior year loss reserve development. Furthermore, potential continuation of the positive earnings reported by MIGI through the first three quarters of 2014 is not a factor in this rating even as the company tries to further distance itself from the unfavorable operating results in 2012 and 2013. The reserve development and near-term operating performance remain key rating factors going forward.
Fosun is a subsidiary of its ultimate parent holding company, Fosun International Holdings Limited, which was founded in 1992 and is headquartered in Shanghai. Fosun is one of the largest privately owned conglomerates in mainland China with over $50 billion in total assets. Currently, more than one-third of its assets are invested in insurance businesses around the world. Fosun is not rated by A.M. Best.
The FSR of B++ (Good) and ICRs of "bbb" have been placed under review with positive implications for the following subsidiaries of Meadowbrook Insurance Group, Inc.:
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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center .
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.