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FOR IMMEDIATE RELEASE
OLDWICK - APRIL 13, 2017 11:27 AM (EDT)
A.M. Best has removed from under review with developing implications and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Ratings of “bbb” of Lexon Insurance Company (Lexon) (Austin, TX) and its affiliate, Bond Safeguard Insurance Company (Bond Safeguard) (Sioux Falls, SD). Lexon and Bond Safeguard are wholly owned operating subsidiaries of Lexon Surety Group, LLC (LSG). The outlook assigned to these Credit Ratings (ratings) is stable.
On Dec. 8, 2016, A.M. Best revised the implications of the companies’ under review status to developing from positive in response to the announcement that LSG and Ironshore Inc. (Ironshore) terminated their definitive agreement for Ironshore to acquire the remaining 80% interest in LSG and its affiliated surety agency operations that Ironshore did not already own. Ironshore retains 20% ownership of LSG and quota share and fronting agreements between Ironshore and LSG remain in place. The removal of the under review status follows completed discussions with the companies’ management teams concerning the financial and operational impacts of the terminated agreement and the companies’ strategic path going forward.
The assignment of the stable outlooks reflects A.M. Best’s view that the companies’ operating performance will remain profitable, and risk-adjusted capitalization will continue to be supportive of its risk profile.
The rating affirmations reflect the companies’ solid risk-adjusted capitalization, adequate operating performance, niche surety market focus and the advantages gained from management’s experience in the surety marketplace. These rating factors are offset by operating losses posted in 2011 and 2012 and adverse loss reserve development in recent calendar years from 2010 to 2015, driven by the emergence of claims stemming from the companies’ subdivision surety bonds that, in A.M. Best’s opinion, reflect the companies’ outsized risk appetite.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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