AM Best Information Services




NOVEMBER 04, 2010 12:00 AM (EDT)

A.M. Best Downgrades Ratings of Columbia Lloyds Companies


CONTACTS:
 Michael T. Venezia
Senior Financial Analyst
(908) 439-2200, ext. 5034
michael.venezia@ambest.com

Jeffrey Mango, CPA
Assistant Vice President
(908) 439-2200, ext. 5204
jeffrey.mango@ambest.com
Rachelle Morrow
Senior Manager, Public Relations
(908) 439-2200, ext. 5378
rachelle.morrow@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK, N.J. - NOVEMBER 04, 2010 12:00 AM (EDT)
A.M. Best Co. has downgraded the financial strength rating to A-(Excellent) from A (Excellent) and issuer credit rating to "a-" from "a" of Columbia Lloyds Companies and its members. These ratings apply to Columbia Lloyds Insurance Company (Houston, TX) and its wholly owned and 100% reinsured subsidiary, MDOW Insurance Company (MDOW). The outlook for all ratings has been revised to negative from stable.

The rating actions reflect Columbia Lloyds Companies' recent underwriting deterioration and loss of surplus as a result of the significant number of lawsuits recently filed against the group, stemming from Hurricane Ike. As a property writer with most of its business risks currently concentrated in Texas, the group has been subjected to weather-related activity and strong competition. While MDOW's entrance into new states has expanded Columbia Lloyds Companies' market presence outside of Texas, exposure to additional weather-related exposures remain. For instance, weather-related losses in 2010 in Oklahoma, combined with aggressive growth trends, have further pressured the group's risk-adjusted capital position. The negative outlook reflects the recent operational challenges faced by the group with respect to continued adverse development on Hurricane Ike claims and reinsurance dependence with resulting pressure on the group's capital position.

Somewhat offsetting these negative rating factors are Columbia Lloyds Companies' generally favorable risk-adjusted capitalization, conservative investment strategy and local market knowledge. Furthermore, the ratings reflect the group's expertise in providing coverages for low value dwellings primarily in Texas, with further expansion occurring in neighboring states with MDOW. Despite the recent underwriting deterioration, growth in net premiums and subsequent loss of surplus, overall underwriting leverage measures remain adequate.

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"; "Natural Catastrophe Stress Test Methodology" and "Catastrophe Risk Management Incorporated Within the Rating Analysis." Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.

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