Fitch Upgrades PMA Capital Corp.’s Ratings After Old Republic Merger; No Action on Old Republic
CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has upgraded all ratings of PMA Capital Corp. and its subsidiaries (referred to as PMA Companies) to Old Republic's (ORI) group rating following the announced closing of the merger. The Rating Outlook is Negative. A complete list of the rating actions follows at the end of this release.
Fitch's upgrade is based on the PMA Companies being acquired by a better capitalized and higher credit quality insurer. Financial leverage will be modestly impacted, as ORI's debt to capital ratio will increase to approximately 10% from 8% as of June 30, 2010.
Fitch expects the PMA Companies' operations to be minimally affected by the acquisition given that management is expected to remain in place. However, investment management will be centralized at ORI and the PMA Companies will adopt its reserving methodology, further supporting the rationale to assign it the group rating.
ORI's workers' compensation insurance book will grow from 12% of total gross premiums to approximately 20% after its acquisition of the PMA Companies.
The Negative Outlook for ORI reflects Fitch's concerns regarding the company's consumer credit indemnity (CCI) portfolio written in its property/casualty unit, which provides credit protection against pools of prime second-lien mortgages. The company grew this product aggressively in 2006-2007, at the peak of the U.S. mortgage lending cycle. Delinquencies and losses on this product rose considerably through 2008 and 2009. However, the company has been actively managing claim remediation, and incurred losses on the CCI portfolio have been modest to date relative to capital. Fitch will continue to monitor this exposure closely for any changes.
Fitch has upgraded the following ratings with a Negative Outlook:
Manufacturers Alliance Insurance Co.
Pennsylvania Manufacturers' Association Insurance Co.
Pennsylvania Manufacturers Indemnity Co.
--Insurer Financial Strength Rating to 'A+' from 'BBB+'.
PMA Capital Corp.
--Insurer Default Rating to 'BBB+' from 'BBB-';
--$54.9 million senior notes, 8.5% due June 15, 2018 to 'BBB' from 'BB+';
--$.05 million convertible debt, 4.25% due Sept. 30, 2022 to 'BBB' from 'BB+'.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (Aug. 13, 2010);
--'Non-Life Insurance Rating Methodology' (March 24, 2010);
--'Fitch's Approach to Rating Insurance Groups' (March 24, 2010);
--'Insurance Industry: Global Notching Methodology and Recovery Analysis' (Dec. 29, 2009).
Applicable Criteria and Related Research:
Insurance Industry: Global Notching Methodology and Recovery Analysis
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493114
Insurance Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547766
Non-Life Insurance Rating Methodology
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=506369
Fitch's Approach to Rating Insurance Groups
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=506368
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
Fitch Ratings
Primary Analyst:
Dafina M. Dunmore, CFA, +1-312-368-3136
Director
Fitch, Inc.
70 W. Madison
Chicago, IL 60602
or
Secondary Analyst:
Doug M. Pawlowski, CFA, +1-312-368-2054
Senior Director
or
Committee Chairperson:
Martha Butler, CFA, +1-312-368-3191
Senior Director
or
Media Relations, New York:
Brian Bertsch, +1-212-908-0549
[email protected]
Source: Fitch Ratings
BestWeek: A.M. Best: Workers’ Comp Combined Ratio Climbs to 111
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News