AM Best Information Services

MAY 25, 2011 12:00 AM (EDT)

A.M. Best Revises Outlook to Negative for Benchmark Insurance Company

Jennifer Marshall, CPCU, ARM
Senior Financial Analyst
(908) 439-2200, ext. 5327

Michael J. Lagomarsino, CFA
Assistant Vice President
(908) 439-2200, ext. 5810

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. - MAY 25, 2011 12:00 AM (EDT)
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" for Benchmark Insurance Company (Benchmark) (headquartered in Eden Prairie, MN).

The rating affirmation reflects Benchmark's adequate level of risk-adjusted capitalization (though weakening in recent years), historically solid underwriting results and consistent generation of pre-tax operating and net income. The ratings also reflect the favorable levels of liquidity Benchmark has maintained.

Offsetting these positive factors are adverse development and strengthening of reserves for prior years' loss and loss adjustment expenses, which have resulted in declining levels of underwriting and operating performance in recent years, even though that performance is in line with the average performance of Benchmark's peer group. Soft market conditions that have challenged its efforts to establish a position in the specialty program underwriting market are also an offsetting factor to the ratings.

The negative outlook reflects A.M. Best's concerns with the negative trends in underwriting performance and risk-adjusted capitalization in recent years. Despite the use of collateral, Benchmark's increased dependence on small unauthorized quota share reinsurers has contributed to the decline in its risk-adjusted capital level.

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"; "The Treatment of Terrorism Risk in the Rating Evaluation"; "Natural Catastrophe Stress Test Methodology"; "Catastrophe Risk Management Incorporated Within Rating Analysis"; and "Catastrophe Analysis in A.M. Best Ratings." 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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AMB# Company Name
011205 Benchmark Insurance Company