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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - APRIL 11, 2011 12:00 AM (EDT)
A.M. Best Co. has upgraded the financial strength rating to B++ (Good) from B+ (Good) and issuer credit rating to "bbb" from "bbb-" of Prime Insurance Company (PIC) (Chicago, IL). The outlook for both ratings has been revised to stable from negative.
These rating actions reflect the reduction in the financial leverage position at the parent company, Prime Holdings Insurance Services, Inc., which had adjusted debt-to-total capital of 49.3% as of year-end 2010, a significant improvement from 67.3% as of third quarter 2009. This improvement was due to the elimination of debt associated with the parent's 2008 share redemption as the Illinois Department of Insurance approved a $6.5 million dividend from PIC in 2010, the primary source of funding of this debt. In addition, the uncertainty and inherent risk associated with a potential change in ownership control has been lessened following management's decision not to explore efforts to raise additional capital.
The ratings reflect PIC's strong capitalization, favorable operating profitability and demonstrated acumen as a successful insurer of surplus lines risks. These positive attributes are offset by PIC's historical adverse loss reserve development, which has moderated in more recent years, and longer-term challenges with respect to competitive pressures, cycle management and enhancing enterprise risk management practices.
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: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "Rating Members of Insurance Groups"; and "A.M. Best's Ratings & the Treatment of Debt." Methodologies 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.