|[March 08, 2013]
A.M. Best Revises Outlook to Negative of Penn National Insurance Companies' Members
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has revised the outlook to negative from stable and
affirmed the financial strength rating (FSR) of A- (Excellent) and
issuer credit ratings (ICR) of "a-" of Pennsylvania National Mutual
Casualty Insurance Company (Penn National Mutual), Penn National
Security Insurance Company (Penn National Security) (both domiciled
in Harrisburg, PA) and Founders Insurance Company (Founders)
A.M. Best also has revised the outlook to negative from stable and
affirmed the FSR of A- (Excellent) and ICR of "a-" of Partners Mutual
Insurance Company (Partners) (Waukesha, WI). Partners' operates
through a pooling agreement with Penn National Mutual, Penn National
Security and Founders. Additionally, A.M. Best has revised the outlook
to negative from stable and affirmed the debt rating of "bbb" on $50
million 9.5% 30-year surplus notes due 2034 issued by Penn National
The ratings reflect the group's excellent risk-adjusted capitalization,
modestly improving underwriting performance in 2011 and 2012 and
generally profitable operating results during the recent five-year
period. The ratings also reflect management's initiatives to improve
underwriting performance by eliminating the earnings drag of lead-based
paint claims through reinsurance covering all existing and future claims
up to a predetermined limit, while seeking to limit the impact of
weather-related losses through various underwriting initiatives.
Thenegative outlook reflects A.M. Best's concerns with regard to the
overall trend in the group's results in recent years and the potential
for a continuation of that trend to adversely impact future operating
results and risk-adjusted capitalization.
Partially offsetting these positive rating factors are the significant
deterioration in Penn National Mutual, Penn National Security, Founders
and Partners' underwriting results during 2010 through 2012 relative to
the group's historical performance due to adverse development of lead
paint claims, significant weather-related losses and soft market
conditions, as well as the weak returns on revenue and equity, which
trail peer composites over the long term. Additionally, the group
remains geographically concentrated, which exposes its results to the
potential for weather-related claims as approximately 40% of premium is
written in Pennsylvania.
Factors that could result in downward rating pressure on the group
include ongoing weak operating earnings over the mid-term; a material
increase in catastrophe losses beyond A.M. Best's expectations, which
weakens overall capitalization; the emergence of unanticipated lead
paint claims that negatively impact results or a material deterioration
in performance or risk-adjusted capitalization.
Factors that could result in upward movement of the ratings include a
significant and sustained improvement in the group's operating earnings,
leading to improved organic surplus growth.
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:
"Understanding BCAR for Property/Casualty Insurers"; "Equity Credit for
Hybrid Securities"; "Catastrophe Analysis in A.M. Best Ratings";
"Insurance Holding Company and Debt Ratings"; "Rating Members of
Insurance Groups"; "Risk Management and the Rating Process for Insurance
Companies"; and "The Treatment of Terrorism Risk in the Rating
Evaluation." 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. For more
information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS
[ Back To Technology News's Homepage ]