Best’s News & Research Service - January 28, 2022 03:08 PM (EST)
AM Best Removes From Under Review With Developing Implications, Affirms Credit Ratings for Lancer Ins Group Members, Affiliate
- January 28, 2022 03:08 PM (EST)
Oldwick //BestWire// - AM Best has removed from under review with developing implications and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) of Lancer Insurance Company (Chicago, IL) and Lancer Insurance Company of New Jersey (Ewing, NJ), referred to as the Lancer Insurance Group. Concurrently, AM Best has removed from under review with developing implications and affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of Lancer Indemnity Company (Lancer Indemnity) (Long Beach, NY). The outlook assigned to these Credit Ratings (ratings) is stable.
These rating actions follow the closing of the merger between Lancer Insurance Group and Core Specialty Insurance Holdings, Inc. (Core Specialty), which was executed via a stock and cash transaction announced on April 16, 2021. Going forward, Lancer Insurance Group will operate as a division of Core Specialty, while retaining its legacy brand, distribution partners and long-standing management team. Additionally, Lancer’s co-founder and CEO, David Delaney, has taken an ownership interest in Core Specialty and was appointed to the board, effective Dec. 31, 2021.
AM Best has removed the group affiliation on the ratings of Lancer Indemnity, reflecting its divestiture from Lancer Insurance Group, as the company— a former member of the group prior to the merger—was not part of the merger agreement.
While the ratings of Lancer Insurance Group take into consideration the additional financial flexibility afforded to the group by being part of a larger organization, they also reflect the group’s post-acquisition balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
Based on the nature of the acquisition, operating results for the group are expected to be on par with historical levels, with no changes to the group’s strategic business plans nor any material integration issues expected in the near term. While it is anticipated that the combination of the two groups could have an accretive impact on their business profiles, further assimilation into the new organization will need to take place before any consideration can be given.
The ratings of Lancer Indemnity reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings also consider its divestiture from the group, the disadvantages of reduced financial flexibility offset by a substantial capital infusion at year-end 2021, which bolstered overall risk-adjusted capitalization and supports the very strong balance sheet strength. Lancer Indemnity’s operating performance is expected to be in line with historical profitability levels. Going forward, AM Best expects the business profile to remain at limited and the company will continue to primarily focus on commercial multiperil coverage for small- to medium-sized retail entities in New York, New Jersey, Connecticut and Pennsylvania. AM Best considers Lancer Indemnity’s enterprise risk management to be appropriate, as the company will continue utilize the same systems, people and resources via a service agreement with Lancer Management Company.
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.