A.M. Best said yesterday that it gave an "A-minus" rating to a new company specializing in program business and alternative risk transfer solutions–SPARTA Insurance Company.
The rating outlook is stable, the Oldwick, N.J.-based rating agency said.
Previously called American Employers' Insurance Company, SPARTA's new name and acquisition were announced last Friday by Hartford, Conn.-based SPARTA Insurance Holdings.
The firm was purchased for an undisclosed price from OneBeacon, a Canton, Mass.-based unit of White Mountains Group.
SPARTA is an acronym for Specialty Program and Risk Transfer Alternatives.
In the ratings announcement yesterday, Best said SPARTA's excellent capitalization, experienced management team, stringent underwriting guidelines, conservative business plan and state-of-the-art technology support the initial rating.
George L. Estes III, the founder and former chief executive officer of Discover Re–a similar business operation–is SPARTA's chairman and chief executive officer.
The announcement of the acquisition came just days after the holding company said it had closed its contractual arrangements for funding in the amount of $279.1 million of private equity capital.
The capital came from a consortium of investors led by Corsair Capital, and including Goldman Sachs, York Capital Management, Primus Capital Funds and KBW Capital Partners.
Best said the "A-minus" (excellent) financial strength rating is a reflection of SPARTA's ability to meet the rating agency's strict capitalization requirements, which are more conservative for start-up operations.
Partially offsetting positive rating factors are the fact that SPARTA is starting up in a softening market with a niche-market focus.
"Due to the start-up nature of the company, there is the potential inability for it to attract the targeted business required to grow the company and for the business written to not generate the earnings anticipated," Best said, adding that it will closely monitor SPARTA's quarterly performance.
Any material negative deviation from the business plan in terms of management, earnings, capitalization or risk profile could result in negative rating pressure, Best said.
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