CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 30, 2012 12:00 AM (EDT)
A.M. Best Co. has upgraded the issuer credit ratings (ICR) to “a+” from “a” and affirmed the financial strength rating (FSR) of A (Excellent) of the members of the Harleysville Insurance Companies (Harleysville). Additionally, A.M. Best has upgraded the ICR to “bbb+” from “bbb” of the downstream holding company, Harleysville Group Inc. (HGI). At the same time, A.M. Best has upgraded the debt ratings to “bbb+” from “bbb” on $100 million 5.75% senior unsecured notes due 2013 of HGI. All of the aforementioned ratings have been removed from under review with positive implications and assigned a positive outlook. (Please see below for a detailed listing of the companies.)
In addition, A.M. Best has removed from under review with developing implications and affirmed the FSR of A- (Excellent) and ICR of “a-” of Harleysville Life Insurance Company (Harleysville Life). The outlook assigned to both ratings is stable.
Concurrently, A.M. Best has withdrawn the FSR of A (Excellent) and ICR of “a” of Harleysville Mutual Insurance Company (Harleysville Mutual).
These rating actions follow the completion of the affiliation between Harleysville and its operating companies with Nationwide Mutual Insurance Company (Nationwide) (Columbus, OH), effective May 1, 2012. As part of this merger, Harleysville Mutual has been merged out of existence, which has necessitated the withdrawal of its ratings. The remaining members of Harleysville will continue to participate in their previously existing pooling agreement under the direction of Nationwide. Moreover, as part of this merger, HGI has been acquired via a holding company within Nationwide and will no longer be publicly traded.
The ratings reflect Harleysville’s excellent level of risk-adjusted capitalization, sound operating performance over the long term and strong regional market franchise. The group also has benefited from the financial flexibility afforded through HGI, and should experience additional benefits from additional distribution channels and product diversity as part of the Nationwide organization.
Partially offsetting these positive rating factors is Harleysville’s variability in underwriting income in recent years, given its exposure to frequent and severe weather-related events, as well as the continuing challenges associated with the highly competitive property/casualty market environment.
The positive outlook reflects A.M. Best’s expectation that Harleysville’s ratings may be considered for an additional upgrade in the near to medium term as its members are eventually integrated into the Nationwide pooling arrangement. The outlook also contemplates the complementary nature of the two parties and the benefits of Nationwide’s extensive business profile for Harleysville policyholders.
The ratings of Harleysville Life acknowledge its direct ownership by Nationwide Mutual and the anticipated support of its new parent to maintain adequate levels of capitalization within Harleysville Life’s operations. Historically, Harleysville Life received capital contributions to offset reported operating losses generated from new business strain and a relatively high expense structure. Asset quality, represented primarily by investment grade bonds, is strong and backs a liability profile containing life insurance and related employee benefits products.
The ICRs have been upgraded to “a+” from “a” and the FSR of A (Excellent) has been affirmed for the following members of Harleysville Insurance Companies:
- Harleysville Insurance Company of New York
- Harleysville Worcester Insurance Company
- Harleysville Insurance Company of New Jersey
- Harleysville Insurance Company
- Harleysville Lake States Insurance Company
- Harleysville Preferred Insurance Company
- Harleysville Pennland Insurance Company
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: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; and “Understanding BCAR for Life/Health Insurers.” 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.