CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 23, 2012 12:00 AM (EDT)
A.M. Best Co. has upgraded the issuer credit rating to “bb+” from “bb” and affirmed the financial strength rating of B (Fair) of Commercial Travelers Mutual Insurance Company (Commercial Travelers) (Utica, NY). Both ratings are under review, and the implications have been revised to positive from negative.
The rating actions reflect Commercial Travelers’ affiliation agreement with National Guardian Life Insurance Company (NGL), which was completed April 23, 2012. As part of the affiliation, NGL provided Commercial Travelers with $5 million in capital in the form of a surplus note and agreed to coinsure 50% of the company’s inforce and new accident and health business, effective January 1, 2012. These actions have significantly improved the capital position of Commercial Travelers and will be reflected in its financial statements as of June 30, 2012. NGL also has assumed control of Commercial Travelers’ board of directors and holds several officer positions at the company. Additionally, NGL has begun working on the integration of various corporate functions into its own framework, including a cost sharing agreement that allows for much needed expense reductions at Commercial Travelers going forward.
The affiliation could potentially lead to the demutualization and acquisition of Commercial Travelers by NGL in the near to medium term. In the meantime, NGL is taking steps to integrate Commercial Travelers with its operations and is exploring other means of explicit support. The ratings of Commercial Travelers will likely remain under review as NGL makes meaningful progress towards establishing a strong, permanent parental commitment.
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. 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.