Best Ratings Report

Editor's note: This information is courtesy of A.M. Best Co. For further information, visit www.ambest.com/ratings.

A.M. Best Co. has revised the outlook to stable from positive and affirmed the financial strength rating of B++(Good) and issuer credit rating of “bbb+” of Standard Mutual Insurance Company (Standard Mutual) (Springfield, IL).

The revised outlook is based on the deterioration in Standard Mutual’s underwriting results in recent years, which is a result of significant storm activity and unusual frequency of large losses. The affirmation of the ratings reflects the company’s improving trends in its core book of business, its long standing market presence and favorable capitalization.

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A.M. Best Co. has removed the financial strength rating (FSR) of B (Fair) from under review with negative
implications and assigned a negative outlook to American Resources Insurance Company, Incorporated (ARIC) (Mobile, AL). Concurrently, A.M. Best has affirmed the FSR and assigned an issuer credit rating (ICR) of “bb” to ARIC. The outlook assigned to the ICR is negative.

ARIC’s FSR was placed under review with negative implications in June 2007 following the announcement that Hermitage Insurance Company (HIC) (White Plains, NY) had reached a definitive purchase agreement to acquire ARIC. Although the purchase of ARIC has subsequently fallen through, these rating actions reflect ARIC’s quota share reinsurance agreement with HIC for new and renewal business effective fourth quarter 2007.

ARIC expects that all premiums will be written directly by HIC and its wholly owned subsidiary, Kodiak Insurance Company (West Trenton, NJ), by year-end 2008, at which point ARIC will largely be in run off.

The ratings reflect ARIC’s poor underwriting and operating performance in 2006 and 2007, driven largely by significant charges taken on its auto warranty book of business entered into by an investor group that purchased the company in late 2005. While this investor group was subsequently replaced, the ultimate result was a weakening in ARIC’s risk-adjusted capital to a vulnerable level and increased uncertainty surrounding the run off of liabilities.

These negative rating factors are somewhat offset by ARIC’s supportive risk-adjusted capitalization and the corrective actions management has implemented to address the run off of its auto warranty book of business.

The outlook reflects the uncertainties and execution risk surrounding ARIC’s run off of liabilities and the negative impact this can have on risk-adjusted capitalization over the near to intermediate term.