Atlantic Mutual Sells Marine Biz To Travelers

Atlantic Mutual, based in New York, said the transaction is part of the company's ongoing strategy to focus on its commercial market segments and affluent personal lines, and sell off its non-core marine division.

The company's hull, luxury yacht, MGA distributed, and pools and syndicate businesses were not included in the sale, the insurer added.

"For us, we view our long-term success really being driven by our commercial market segments business and our affluent personal lines business. Meanwhile, one of the areas Travelers is building up is its marine–just a few weeks ago, it acquired some marine business in a deal with Royal & SunAlliance," said Peter Scott, spokesman at Atlantic Mutual.

The marine business has been a historic part of Atlantic Mutual. The company began as a marine insurer 160 years ago and was one of the companies insuring the Titanic at the time of its sinking in 1912.

But currently, Mr. Scott told National Underwriter, "marine is not a core part of our strategy, but it is part of Travelers' strategy." He explained that the segment being disposed of represents roughly 10 percent of the $1.1 billion in premiums which the company wrote last year.

Klaus Dorfi, chairman and chief executive officer at Atlantic Mutual, said the transaction, "with recently implemented internal expense initiatives, provides the capital necessary to eliminate costly financial reinsurance and position the company to take better advantage of our strong market positions in commercial market segments and affluent personal lines."

Mr. Dorfi said the company's marine agents, brokers and policyholders should experience a "smooth transition."

The announcement of the deal follows recent action on the company by rating agencies, which have placed Atlantic Mutual ratings on watch and downgraded them in recent months because of concerns about the insurer's overall financial health.

Standard & Poor's Ratings Services in New York, for instance, had downgraded the credit rating for Atlantic Mutual and its units to "Triple-B" from "Triple-B-Plus" last June, citing the company's "weak underwriting performance."

S&P listed a number of concerns about the insurer's financial health, including the carrier's adverse reserve development over the past two years; reduced investment income; increased reliance on financial reinsurance to maintain surplus; the potential for further reserve strengthening; and limited financial flexibility.

The Oldwick, N.J.-based A.M. Best Co. also took ratings action this past June, placing the "A-Minus" financial strength rating of Atlantic Mutual under review with negative implications, prompted by the company's "weak underwriting and operating performance" and its use of reinsurance transactions to bolster surplus.

Other firms that also took ratings actions include Fitch Ratings in New York, which has its "Rating Watch Negative" status on the "Triple-B" insurer financial strength ratings and the "Double-B" surplus note rating for Atlantic Mutual Insurance Company.

Earlier this month, the New York-based Moody's Investors Service placed its "Baa1″ insurance financial strength rating for Atlantic Mutual's pooled insurance units and the "Ba1″ rating for the insurer's $100 million worth of surplus notes on review for a possible downgrade, citing its concern regarding the insurer's capital strength.

Atlantic Mutual has been looking at ways to improve its bottom line, noted John Iten, a credit analyst at S&P. "Atlantic Mutual has publicly been looking at capital-raising alternatives to improve their capital position this year," he said. "They have been looking at ways to improve balance sheet and reduce the usage of financial reinsurance. They also cut expenses this summer by reducing staff. So this transaction is one part of their overall plan."

Mr. Iten added, "So this was one of the options they were looking at, and they obviously found a buyer. Also, Atlantic Mutual's marine business is somewhat standalone, as opposed to a lot of other lines, which makes it easier to sell than perhaps some other parts."