A.M. Best Co. has affirmed the financial strength rating of B++ for Physicians Insurance Mutual Group.

A.M. Best Co. has affirmed the financial strength rating (FSR) of B++ (Good) and assigned an issuer credit rating (ICR) of “bbb+” to Physicians Insurance Mutual Group and its members, Physicians Insurance A Mutual Company and its reinsured subsidiary, Western Professional Insurance Company. The outl Moody's rates Progressive's jr. sub. debt A2 
 
$1 billion of junior subordinated debentures rated. 
 
New York, June 19, 2007 -- Moody's Investors Service has assigned an A2 rating to Progressives Corporation's (NYSE: PGR, senior debt rated A1) proposed $1 billion offering of junior subordinated debentures due 2067.  
 
The net proceeds from the offering are expected to be used to partially finance the company's stock buyback program and special dividend announced on June 14, 2007. The outlook for the ratings is stable. 
 
Moody's A2 rating on the debentures is based on the junior subordinated ranking of these instruments, and considers the structural priority of claim for holders of the company's A1-rated senior unsecured debt, as well as the fundamental credit profile of Progressive Corporation. 
 
According to Moody's, Progressive's ratings reflect the organization's leadership position in the personal automobile market, along with its strong commitment to profitability and efficiency in its core business, very strong risk adjusted capitalization, and its moderate financial leverage profile. Offsetting this to a modest degree is the group's product concentration in personal automobile insurance, which tends to magnify the impact of broad market disruptions and accentuates exposures to regulation and competition. 
 
Progressive's financial leverage will increase in the near-term due to the announced recapitalization plan, but will remain within Moody's rating's expectations. Moody's considers operational leverage approaching 3 times to be high compared to PGR's peers, however, the company's strong risk adjusted capitalization and consistent history of robust subsidiary earnings and surplus growth mitigates our concerns to some degree. 
 
Because of certain equity-like features contained in the junior subordinated debentures, Moody's has accorded them Basket D treatment at the time of issuance on Moody's Hybrid Debt-Equity Continuum, which means that they will initially be treated as 75% equity and 25% debt for financial leverage calculations. Basket D treatment will apply for 10 years or until 2017 (i.e. until 50 years prior to the debentures' final maturity). After this time, but only until 2037 (i.e. 30 years prior to maturity), they will shift to Basket C (50% equity and 50% debt). 
 
Thereafter, until 2047 (i.e. 20 years until maturity), the instruments will be accorded Basket B treatment (25% equity, 75% debt) and will finally shift to Basket A for the remaining 20 years to maturity.  
 
Interest payments on the junior subordinated debentures will be incorporated as presented under GAAP and incorporated into the fixed charge coverage ratio. 
 
Moody's said that the basket designations are based on the following rankings on the three dimensions of equity: 
 
No Maturity -- Strong 
 
The junior subordinated debentures have a final maturity of 60 years with a scheduled maturity of 30 years and are callable at par after 10 years. 
 
All calls are subject to a legally binding Replacement Capital Covenant (RCC). The RCC obligates Progressive not to redeem or repurchase the junior subordinated debentures prior to 2047 unless they are refinanced through the issuance of the same or more equity-like securities, which have been clearly specified. The RCC initially runs in favor of a specified series of Progressive's indebtedness ("Initial Covered Debt").  
 
Progressive Corporation will