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FOR IMMEDIATE RELEASE
OLDWICK - MAY 28, 2015 04:35 PM (EDT)
A.M. Best has revised the outlook to stable from negative and affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit ratings (ICR) of "a-" of Pennsylvania National Mutual Casualty Insurance Company (Penn Mutual) and its subsidiaries, Penn National Security Insurance Company, Founders Insurance Company and Partners Mutual Insurance Company (collectively referred to as Penn National Insurance Companies). Concurrently, A.M. Best has affirmed the debt rating of "bbb" on $50 million, 9.5% surplus notes, due 2034 issued by Penn Mutual. All companies are headquartered in Harrisburg, PA, except for Partners Mutual Insurance Company, which is headquartered in Waukesha, WI.
The ratings reflect the group's excellent risk-adjusted capitalization, a return to profitable underwriting results and improvement in pre-tax operating results in recent years. The ratings also reflect management initiatives to eliminate the earnings drag of lead-based paint claims and reduce the impact of weather-related losses through various underwriting and reinsurance initiatives.
Partially offsetting these positive rating factors is the significant deterioration in underwriting results in 2010-2012 relative to the company's historical performance, due to the combined effect of adverse development of lead-based paint claims, significant weather-related losses and soft market conditions. Further, the group's returns on revenue and equity trail the peer composite averages over the long term. Additionally, the group remains geographically concentrated with approximately 39% of premiums written in Pennsylvania, which exposes results to the potential for weather-related claims.
The stable outlook reflects the steady improvement in underwriting results, which have benefited from a reduction in natural catastrophe losses and the diminished impact of lead-based paint claims, and projections for sustained underwriting profitability over the near term.
While positive rating actions are not expected in the near term, factors that could result in upward movement of the assigned ratings include a sustained improvement in operating earnings at a level that exceeds the peer composite, resulting in an improved ability to generate organic surplus growth.
Factors that could result in downward rating pressure include a weakening in operating earnings or a material deterioration in risk adjusted capitalization.
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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology .
Key insurance criteria reports utilized:
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 visit A.M. Best's Ratings & Criteria Center.
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