AM Best


A.M. Best Affirms Ratings of Penn National Insurance Companies’ Members


CONTACTS:

Gordon McLean
Senior Financial Analyst
+1 908 439 2200, ext. 5304
gordon.mclean@ambest.com

Jacqalene Lentz, CPA
Managing Senior Financial Analyst
+1 908 439 2200, ext. 5762
jacqalene.lentz@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - AUGUST 23, 2016 11:24 AM (EDT)
A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit ratings of “a-” of Pennsylvania National Mutual Casualty Insurance Company (Penn Mutual) and its subsidiaries, Penn National Security Insurance Company, Founders Insurance Company (Lawrenceville, NJ) and Partners Mutual Insurance Company (Waukesha, WI) (collectively referred to as Penn National Insurance Companies). Concurrently, A.M. Best has affirmed the issue rating of “bbb” on $50 million, 9.5% surplus notes, due 2034 issued by Penn Mutual. The outlook for each rating is stable. All companies are headquartered in Harrisburg, PA, unless otherwise specified.

The ratings reflect the group’s excellent risk-adjusted capitalization, return to profitable underwriting beginning in 2014, and resulting improvement in pre-tax operating earnings in recent years. These results reflect management initiatives to improve underwriting performance, the reduction in earnings drag associated with lead-based paint claims and volatility associated with accumulations of weather-related losses through various reinsurance and underwriting initiatives.

Partially offsetting these positive rating factors is the unfavorable underwriting performance during 2011 and 2012 relative to the group’s historical performance given the combined effect of adverse development of lead paint claims, significant weather-related losses and soft market conditions. The magnitude of the underwriting losses during this period have negatively impacted the group’s average pre-tax return on revenue measures, which trail the commercial casualty composite over the long term. In addition, the group remains geographically concentrated with approximately 40% of premiums written within Pennsylvania, which naturally exposes results to the potential for weather-related claims. Despite these concerns, the stable outlooks reflect the improvement in underwriting results throughout the five-year period, which have benefited from a reduction in natural catastrophe losses and the diminished impact of lead paint claims, as well as expectations for solid underwriting performance over the near term.

While positive rating actions are not expected in the near term, factors that could result in upward movement of the affirmed ratings include an improvement in operating earnings to a level that exceeds the peer composite and can be sustained at a level that materially outperforms other similarly rated commercial casualty carriers while maintaining a strong level of risk-adjusted capitalization.

Alternatively, negative rating actions may occur should operating results deteriorate due to a weakening in underwriting performance. Negative rating actions may also occur should the group’s risk-adjusted capitalization decline to a level that is not in line with A.M. Best’s expectations, particularly if the resulting performance is below that of similarly rated peers.

This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

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