Ratings Recap: CRM Holdings, Harleysville, Missouri Employers, Illinois State Bar

A.M. Best Co. has placed the financial strength ratings (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of San Francisco-based Majestic Insurance Company and Bermuda-based Twin Bridges under review with negative implications. Best also placed the ICRs of “bbb-” of CRM Holdings Ltd. (CRMH of Hamilton, Bermuda, Embarcadero Insurance Holdings, Inc. of San Francisco, and Delaware-based CRM USA Holdings, Inc. under review with negative implications. In addition Best placed the debt rating of “bb” of the trust preferred securities of CRM USA Holdings Inc. and the “bb” of the surplus notes of Embarcadero Insurance Holdings, Inc. under review with negative implications. Best said the rating actions reflect its “concern over the potential impact on Majestic and Twin Bridges from the issues faced by their affiliate, Compensation Risk Managers LLC (CRM LLC) and their ultimate parent, CRM Holdings Ltd. These issues stem from administrative charges brought by the New York Workers’ Compensation Board, which could result in the possible revocation of the third party administrator license of CRM LLC in New York and potential fines and/or penalties against CRMLLC associated with the allegations. Additionally, the under review status reflects the impact on the financial flexibility of CRM Holdings Ltd. due to the decline in the market value of its common stock following the announced charges, as well as the limited capital available through its insurance subsidiaries to support their anticipated growth. Furthermore, 2007 capitalization levels at Majestic fell somewhat short of the requirement by A.M. Best for the ratings based on higher premium growth, partially attributable to previously self-insured business being written on a first dollar basis.

Fitch Ratings has affirmed its ‘BBB’ Issuer Default Rating (IDR) on Harleysville Group Inc. (HGIC) and the ‘BBB-‘ rating on HGIC’s $100 senior unsecured notes due July 15, 2013. Fitch also has affirmed the ‘A-‘ Insurer Financial Strength (IFS) rating on the Harleysville intercompany pool (Harleysville), and has revised the Rating Outlook to Positive from Stable. Fitch said the outlook revision reflects its “recognition that HGIC’s underwriting results have improved dramatically in recent years. HGIC’s overall statutory combined ratio for 2007 continued its recent trend of steady sequential improvement to 96.7 percent from 98.6 percent, 102.2 percent, and 105.9 percent in 2006 and 2005, and 2004 respectively.” Fitch also indicated that “GIC’s underwriting performance has significantly improved relative to industry benchmarks over the same time period. The rating agency said “If HGIC is able to sustain its underwriting performance while maintaining strong capital levels and conservative loss reserves, Fitch could upgrade the company’s ratings.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’- (Excellent) and issuer credit rating (ICR) of “a-” of Missouri Employers Mutual Insurance Company (MEM), and has revised the ratings outlook to positive from stable. “The ratings and positive outlook are based on the company’s excellent capitalization, strong underwriting through improved reserve development, consistent operating performance and dominant position in the Missouri workers’ compensation market,” Best explained. “While MEM is technically a state fund, it is not a state agency and is not the insurer of last resort or the residual market in Missouri, but it benefits from its ability to utilize multiple pricing tiers and its exemption from federal income taxes.”

A.M. Best Co. has upgraded the financial strength rating to ‘A’ (Excellent) from ‘A’- (Excellent) and issuer credit rating to “a” from “a-” of Illinois State Bar Association Mutual Insurance Company (ISBA Mutual) and has revised both ratings outlooks to stable from positive. “These ratings actions follow the positive rating outlook that was assigned to ISBA Mutual in May 2007 and takes into consideration its strong operating performance in 2007,” said Best. “The ratings also recognize ISBA Mutual’s extensive knowledge of the Illinois legal community and the benefits it derives as the endorsed carrier of the Illinois State Bar Association. ISBA Mutual’s management has employed a conservative operating strategy over the years, which has contributed to the company’s consistently favorable operating results and excellent risk-adjusted capitalization. The ratings also acknowledge ISBA Mutual’s high policyholder retention levels and conservative investment portfolio.”