Best Places Atlantic Mutual Under Review

Best Places Atlantic Mutual Under Review

NU Online News Service, June 10, 9:52 a.m. EDT?A.M. Best Co. said it placed the "A-Minus" financial strength rating of Atlantic Mutual Companies under review with negative implications, prompted by the company's "weak underwriting and operating performance" as well as its use of reinsurance transactions to bolster surplus.

The Oldwick, N.J.-based rating firm also added that it placed the "Triple-b" debt rating of Atlantic Mutual's existing $100 million 8.15 percent surplus notes, due 2028, under review with negative implications.

In addition to the insurer's weak underwriting and operating figures, Best also cited its concern for Atlantic Mutual's "somewhat limited financial flexibility" and the potential for further adverse prior year loss reserve development.

Best noted that Atlantic Mutual's management is pursuing "various capital raising alternatives" to find permanent funds and enhance the quality of surplus and earnings.

The timely execution of this plan is critical, the ratings agency commented, and ratings are likely to be downgraded if the company is unsuccessful in its capital-raising efforts.

W. Dolson Smith, a Best analyst, said that the company, over the last four years, had a history of weak underwriting performance. "There has been some improvement in the accident year underwriting results in 2002. Notwithstanding this, there has been adverse loss reserve developments, and that has largely been the cause of the weak underwriting performance and profitability," Mr. Smith said.

Headquartered in New York, Atlantic Mutual provides commercial, personal and marine property-casualty insurance. Through its subsidiaries, including Atlantic Mutual Insurance, Centennial Insurance and Atlantic Specialty Insurance, the company offers insurance programs and loss control for large companies, and specialty coverage for small- to mid-sized businesses such as financial institutions, retailers and wholesalers.