Press Release - JUNE 01, 2017

A.M. Best Affirms Credit Ratings of Baldwin & Lyons, Inc. and Its Subsidiaries


CONTACTS:
 Charles M. Huber
Director
+1 908 439 2200, ext. 5122
charles.huber@ambest.com

Daniel J. Ryan
Senior Director
+1 908 439 2200, ext. 5325
daniel.ryan@ambest.com
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - JUNE 01, 2017
A.M. Best has affirmed the Financial Strength Ratings (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of Protective Insurance Company (PIC) and its wholly owned subsidiary, Sagamore Insurance Company (Sagamore). These companies are collectively referred to as the Baldwin & Lyons Group or the group. In addition, A.M. Best has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a” of PIC’s other wholly owned subsidiary, Protective Specialty Insurance Company (PSIC). Concurrently, A.M. Best has affirmed the Long-Term ICR of “a-” of the organization’s publicly traded ultimate parent, Baldwin & Lyons, Inc. (B&L) [NASDAQ: BWINA and BWINB]. The outlook for each of these Credit Ratings (ratings) is stable. All companies are domiciled in Carmel, IN.

The ratings of PIC and Sagamore reflect the group’s strong balance sheet, favorable overall operating performance and solid market position in its core commercial trucking market. These positive rating factors are derived from the group’s modest underwriting leverage, disciplined underwriting practices and strong knowledge of the national and regional commercial trucking market. Long-standing relationships are maintained with a core group of large trucking firms, including the group’s largest customer, resulting from its commitment to service and product development initiatives. In addition, the group continues to diversify and expand its products and markets, including small fleet trucking programs and workers’ compensation insurance, the latter largely marketed, along with other coverages, to commercial trucking independent contractors. These positive rating attributes are partially offset by concerns regarding the group’s heavy customer concentration, the potential financial fallout and risk encountered in the event this long-standing relationship is non-renewed or terminated and management’s recent underestimation of losses related to its public transportation book, resulting in material adverse loss reserve development in 2016.

Over the years, the group has benefited from its affinity relationship with FedEx. Any material deviation in this relationship could be detrimental to the group’s business profile. Although the company has a very limited business scope, PSIC’s ratings take into consideration its strategic role within the group, its strong balance sheet and the explicit financial support provided by PIC, which includes a financial guarantee and aggregate stop loss coverage. In addition, PSIC’s ratings consider the mitigation of underwriting risks through substantial reinsurance.

These positive rating factors are offset by PSIC’s limited business profile, weaker-than-expected operating results and its inability to gain traction in many of the markets it penetrates. PSIC’s catastrophe-exposed Florida business owner’s policy writings were discontinued after 2012, which was later followed by the termination of its largest managing general agent writing legal professional errors and omissions business in 2015. The ratings of B&L reflect the organization’s low financial leverage, above-average interest coverage and fixed charge coverage ratios, and its access to capital markets. B&L is a publicly traded company listed on the NASDAQ.

Negative rating action could occur if the group’s operating performance is impacted by material unfavorable investment performance given the sizable amounts of higher risk invested assets held by the group’s member companies. In addition, negative rating action may occur as a result of an unforeseen change in the group’s relationship with its largest client, or if there were significant weakening of the balance sheet due to a loss of surplus, which could result from an increase in claims frequency or severity; a decline in investment values; or from adverse reserve development.

This press release relates to Credit Ratings 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 see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source.


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