Best’s News & Research Service - March 20, 2008 10:50 AM (EDT)
A.M. Best Affirms Ratings of United America Indemnity, Ltd. and Its Subsidiaries
OLDWICK, N.J. //BestWire// - A.M. Best Co. has affirmed the financial strength ratings (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of United National Group (United National) (Bala Cynwyd, PA) and Penn-America Group (Penn-America) (Bala Cynwyd, PA) and their respective member companies. A.M. Best also has affirmed the ICR of “bbb” of the publicly traded parent holding company, United America Indemnity, Ltd. (UAI) (Georgetown, Cayman Islands) [NASDAQ: INDM]. Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICR of “a” of UAI’s wholly-owned reinsurer, Wind River Reinsurance Company Ltd. (Wind River Reinsurance) (Hamilton, Bermuda). The outlook for all ratings is stable.
United National’s ratings reflect its strong operating results, solid risk-adjusted capitalization and well-established presence within the surplus lines and specialty admitted markets. Somewhat offsetting these positive rating factors is United National’s above average ceded underwriting leverage and the constraints on capital appreciation from annual dividends utilized to fund UAI’s debt obligations. United National’s ceded leverage gross of collateral held, while declining considerably in recent years, has historically been elevated relative to the surplus lines composite; however, factoring in collateral from affiliated and unaffiliated reinsurers, United National’s ceded leverage is in line with the composite average. United National’s leadership position and underwriting expertise within the specialty admitted and non-admitted markets has allowed it to consistently generate favorable operating results.
Penn-America’s ratings recognize its strong capitalization, excellent operating performance and solid market profile. These positive rating factors are slightly tempered by the adverse loss reserve development on older accident year’s reserves; however, older accident year reserve development has been more than offset by favorable development for the most recent accident years. Penn-America’s disciplined focus on small surplus lines risks somewhat insulates it from the greater degree of market competition on middle market and large account surplus lines business, although the increased level of competition led to a decreased level of written premium in 2007.
UAI operates predominantly in the U.S. excess and surplus lines market distributing property/casualty products through three distinct business units: (1) the small commercial business unit, (2) the program business unit and, (3) the specialty wholesale brokerage unit. UAI also provides third party treaty and facultative reinsurance for writers of surplus lines and specialty property/casualty insurance through its wholly-owned reinsurer, Wind River Reinsurance, whose portfolio is comprised predominantly of ceded business from the affiliated U.S. domestic groups. Wind River Reinsurance is conservatively building its portfolio of third party business.
The FSR of A (Excellent) and ICRs of “a” have been affirmed for United National Group and its following members:
- Diamond State Insurance Company
- United National Insurance Company
- United National Specialty Insurance Company
- United National Casualty Insurance Company
The FSR of A (Excellent) and ICRs of “a” have been affirmed for Penn-America Group and its following members:
- Penn-America Insurance Company
- Penn-Star Insurance Company
- Penn-Patriot Insurance Company
The FSR of A (Excellent) and ICR of “a” have been affirmed for Wind River Reinsurance Co. Ltd.
The ICR of “bbb” has been affirmed for United America Indemnity, Ltd.