AM Best

A.M. Best Affirms Ratings of American Modern Insurance Group and Its Members


Kenneth Tappen

Senior Financial Analyst

(908) 439-2200, ext. 5248

Joseph Burtone

Assistant Vice President

(908) 439-2200, ext. 5125

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. - FEBRUARY 23, 2011 12:00 AM (EST)
A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of American Modern Insurance Group (American Modern) (Amelia, OH) and its property/casualty members. The outlook for these ratings is stable. The companies of American Modern are owned by Munich-American Holding Corporation, the U.S.-based subsidiary of Munich Reinsurance Company. (See below for a detailed listing of the companies.)

The ratings of American Modern reflect its solid risk-adjusted capitalization, favorable operating performance and continued strategy as a provider of diversified specialty personal lines insurance products. These positive rating factors are derived from management's disciplined and focused operating strategies. American Modern has achieved significant surplus growth over the previous five-year period through solid investment income, and in most years, favorable underwriting performance. As American Modern continues to offer specialty personal lines products with a niche market focus, it provides a significant competitive advantage, particularly in terms of pricing, claims adjusting and overall marketing strategies. This has contributed to American Modern's ability to sustain premium growth in a competitive environment.

The ratings also acknowledge the financial flexibility afforded American Modern as part of the Munich-American Holding Corporation organization.

Partially offsetting these positive rating factors is American Modern's above average underwriting leverage and elevated underwriting expense ratio relative to industry composite norms and its susceptibility to catastrophe events, as approximately 45% of its business is residential property. The elevated underwriting expense ratio is primarily attributable to American Modern's competitive commission expense structure, particularly in terms of its profitability-based incentives. As American Modern has a concentration of business in the residential property market, it is exposed to the impact of weather-related catastrophes. However, American Modern continues to maintain its reinsurance programs and more selectively spread its geographical risks in catastrophe-prone areas to mitigate potential effects of future catastrophic events.

A.M. Best also has affirmed the FSR of A- (Excellent) and ICR of "a-" of American Modern Life Insurance Company (American Modern Life) (Cincinnati, OH) and the FSR of B++ (Good) and ICR "bbb" of Southern Pioneer Life Insurance Company (Trumann, AR). The outlook for these ratings is stable.

These ratings are based on the life companies' strong risk-adjusted capitalization and the support both receive from American Modern. Partially offsetting these rating factors are the life companies' modest earnings performance, their relatively small contributions to the parent organization and the decline in direct premiums written due to the economic environment.

The FSR of A+ (Superior) and ICRs of "aa-" have been affirmed for the American Modern Insurance Group and its following property/casualty members:

- American Modern Home Insurance Company

- American Family Home Insurance Company

- American Western Home Insurance Company

- American Modern Surplus Lines Insurance Company

- American Modern Select Insurance Company

- American Southern Home Insurance Company

- American Modern Insurance Company of Florida, Inc.

- First Marine Insurance Company

- American Modern Lloyds Insurance Company

The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Rating Members of Insurance Groups"; "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "Natural Catastrophe Stress Test Methodology"; "Catastrophe Risk Management Incorporated Within the Rating Analysis"; and "A.M. Best's Ratings & the Treatment of Debt." Methodologies can be found at

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

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