A.M. Best Places Echelon Insurance Under Review

A.M. Best. Co. has placed the rating of Echelon Property & Casualty Insurance Company under review with developing implications as the company seeks to be acquired by Guardian Insurance Co.

Oldwick, N.J.-based Best said action on the Chicago-headquartered Echelon's "B-minus (Fair)" financial strength rating follows the announcement that Lockhart Insurance Group of St. Thomas, Virgin Islands, plans to acquire 83 percent of Echelon's stock for $4.2 million. The deal is awaiting approval by the Illinois Division of Insurance. Lockhart sells insurance under the Guardian name.

Echelon's policyholders' surplus declined 83 percent from 2006 to 2007 to $404,459, according to an actuarial opinion obtained through Highline Data.

Best said the decline was the result of loss reserve increases, changes in nonadmitted assets, and the company's decision to stop writing any new or renewal business as of September 2007.

The company will remain under review pending the close of the acquisition and discussions with management "regarding ultimate capitalization plans and Echelon P&C's new business plan," Best said.

However, Best added that if the acquisition does not take place in a reasonable amount of time Echelon's rating will be downgraded because its surplus fell below Illinois minimum regulatory requirements.

In a management discussion filed with Highline Data, the company, founded in 2003, said it writes risk in general liability, commercial multiperil, liquor liability, commercial auto liability and nondealers garage liability in Illinois. It also wrote business in Arizona on an admitted basis and Georgia and Indiana on an excess and surplus lines basis.

Figures compiled by Highline Data show that in 2006 the company reported a combined ratio of 146.6 on direct written premiums of $3.8 million. From 2003 to 2006 it reported net income loss each year. In 2006 that figure stood at a loss of $1.03 million.

According to the Lockhart Web site, the company is licensed to write all lines of p-c insurance in the U.S. Virgin Islands and British Virgin Islands. It is the largest provider of automobile insurance in the U.S. Virgin Islands but offers a broad line of insurance.

According to Highline Data, the company reported a combined ratio of 87.5 in 2006 on direct written premium of $23.7 million.