CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - APRIL 19, 2013 12:00 AM (EDT)
A.M. Best Co. has revised the under review with positive implications to under review with developing implications for the financial strength rating of B (Fair) and issuer credit of “bb+” of Commercial Travelers Mutual Insurance Company (Commercial Travelers) (Utica, NY).
The revised implications reflect the uncertainty of the regulatory and legislative process for demutualizing Commercial Travelers, which would allow full ownership by National Guardian Life Insurance Company (NGL) (Madison, WI). The revised implications also reflect the poor operating results and low risk-adjusted capitalization Commercial Travelers reported at year-end 2012.
To date, NGL has demonstrated support for Commercial Travelers, including the purchase of a $5 million surplus note issued by the company in order to bolster Commercial Travelers' weak risk-adjusted capital position. NGL also has implemented a co-insurance agreement for 50% of Commercial Travelers' student medical and accident business. These actions are reflected in its year-end 2012 statutory financials. Additional cost-sharing initiatives also are expected to allow Commercial Travelers to operate more efficiently going forward.
A.M. Best will continue to monitor Commercial Travelers' operations and will re-evaluate its ratings as it progresses through the regulatory review process. The inability of NGL to successfully demutualize Commercial Travelers, a perceived loss of support or continued deterioration in financial results would be viewed negatively by A.M. Best, given Commercial Travelers’ weakened financial position reported at year-end 2012.
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.
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.