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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 09, 2011 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating of A++ (Superior) and issuer credit rating of "aa+" of Kansas Bankers Surety Company (Kansas Bankers) (Topeka, KS). The outlook for both ratings is stable.
The ratings reflect Kansas Bankers' superior capitalization, historical operating profitability, solid balance sheet liquidity measures and its strong presence in the niche market of serving small to medium-size commercial banks. The positive rating attributes are supported by Kansas Bankers' conservative underwriting leverage measures, high quality balance sheet and its recognition among Midwest regional commercial banks, a market the company has served for decades. Furthermore, management continues to emphasize profitability over top-line growth, as demonstrated by the decision in September 2008 to discontinue its Bank Deposit Guaranty Bond product, which made up approximately 50% of its premium writings in previous years. The rating recognizes the additional financial flexibility and support provided by its publicly traded parent company and ultimate shareholder, Berkshire Hathaway Inc. [NYSE: BRK.A and BRK.B].
The positive rating factors are offset by Kansas Bankers' lackluster operating results in recent years, which were strained by underwriting losses in the Bank Deposit Guaranty Bond and directors and officers (D&O) products. In addition, the company maintains business concentration risks arising from its product and geographic focus. The company has a limited product diversification profile of focusing solely on the banking industry, with its two largest products – D&O Indemnity and Bank Lender Liability and Financial Institution Crime Bonds – accounting for more than 75% of premium volume. In addition, with a heavy concentration in the Midwest, the company's top-five states account for more than 70% of direct premiums written, which may leave it susceptible to economic and competitive environment changes.
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" and "Understanding BCAR for Property/Casualty Insurers." Methodologies 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.