A.M. Best Boosts Allmerica Ratings

NU Online News Service, Jan. 22, 11:30 a.m. EST?A.M. Best Co. announced it has upgraded various ratings of Allmerica Financial Corporation, including financial strength ratings of the insurer's property-casualty companies, because the insurer eliminated dividends.[@@]

The Oldwick, N.J.-based rating agency said its action affected Allmerica's p-c companies' ratings, raised to "A-minus" (Excellent) from "B-double-plus" (Very Good), as well as the insurer's life-health companies, whose ratings moved up to "B-plus" (Very Good) from "B-minus" (Fair). At the same time, Allmerica's debt ratings were also upgraded, to "double-B-plus" from "double-B" for senior debt, "double-B-minus" from "B-plus" for capital securities, and "AMB-3" from "AMB-4" for commercial paper. All ratings have been assigned "stable" outlooks by A.M. Best.

Commenting on its decision, Best said the financial-strength ratings upgrade for Allmerica's p-c units shows the insurer's improved capitalization driven by eliminating dividends to support life-health affiliates.

Best added that Allmerica has also maintained satisfactory historical operating results and a strong regional market presence. Additionally, Best ratings said it found Allmerica has a well-balanced business composition and geographic diversification, benefiting from well-established regional organizations with long-standing agency relationships.

The rating agency said there are also a number of adverse factors that partially offset Allmerica's positive attributes. Best said the insurer has high underwriting leverage, primarily attributable to $650 million in dividends paid between 1999 and 2002, which significantly lowered surplus. Furthermore, the insurer has reported adverse loss-reserve development in recent years and increased weather-related losses last year, which has shrunk profit margins.

However, the rating agency predicted that Allmerica will produce solid operating earnings going forward, thanks to continued firm market conditions and management's ongoing actions--including agency management programs, pursuing rate adequacy in all territories, improving work processes and shifting the business mix to more attractive markets.

Based in Worcester, Mass., Allmerica Financial is an insurance and financial services holding company providing personal auto, homeowners, workers' compensation, commercial automobile and commercial multiple-peril insurance coverage through its Citizens Insurance and Hanover Insurance subsidiaries. For its 2003 third quarter, the insurer's p-c segment reported net income of $38.6 million. P-C net premiums earned were $561.2 million for the quarter.

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A.M. Best Boosts Allmerica Ratings

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