FEBRUARY 27, 2012 12:00 AM (EST)

A.M. Best Revises Outlook to Negative for Baltimore Equitable Society

FOR IMMEDIATE RELEASE

OLDWICK, N.J. - FEBRUARY 27, 2012 12:00 AM (EST)
A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A+ (Superior) and issuer credit rating of “aa-” of Baltimore Equitable Society (Baltimore Equitable) (Baltimore, MD).

The revised outlook of Baltimore Equitable reflects the weakening trend of total returns on surplus over the past several years driven by lagging investment results that are expected to persist going forward. The ratings also reflect the company’s strong capitalization, excellent balance sheet liquidity and long-standing market presence as a perpetual property writer, primarily in Maryland.

Partly offsetting these positive rating factors are Baltimore Equitable’s elevated investment leverage, which leaves its surplus susceptible to equity market volatility, as well as its exposure to severe, weather-related events due to its property focus and geographic concentration of business.

Negative rating actions could occur if there were a sudden, unexpected and material decline in Baltimore Equitable’s risk-adjusted capitalization, a sustained deterioration in its operating performance or total investment returns, or a diminishing of its liquidity measures.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Catastrophe Analysis in A.M. Best Ratings”; “Risk Management and the Rating Process for Insurance Companies”; and “Understanding BCAR for Property/Casualty Insurers.” Best’s Credit Rating Methodology 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.