New York, September 05, 2003 -- Moody's Investors Service has placed the ratings of the Atlantic Mutual Companies on review for possible downgrade. Included in the review is the Ba1 rating of Atlantic Mutual Insurance Company's $100 million in surplus notes due in 2028, as well as the Baa1 insurance financial strength rating of its pooled insurance entities.
Moody's explained that, during the rating review, it will evaluate the impact of possible reinsurance contract commutations under consideration by Atlantic Mutual. In addition, the longer-term implications of other actions under consideration by the company will be evaluated by the rating agency. Moody's commented that these actions include possible capital raising initiatives and placing some business into runoff.
With limited other capital sources, due to its mutual company form, beginning in 2001 Atlantic Mutual increased its reliance on reinsurance to support its capital base in the face of a prolonged soft market, losses from the terrorist attacks of September 11, 2001 and deteriorating equity markets. Atlantic Mutual is now considering unwinding some of these reinsurance contracts as part of a broader plan to replace soft capital with more permanent forms of capitalization. The reinsurance commutations, in isolation, would have the effect of reducing statutory surplus and related solvency ratios. However, the company is actively pursuing a number of strategic and operational initiatives whose purpose is to offset this capital depletion. These metrics have increased meaning for surplus note issuers because they can influence the decisions by insurance regulators about whether to permit the company to make interest payments on the notes. That said, Moody's expects Atlantic Mutual's NAIC risk-based capital ratios to remain strong.
The following ratings have been placed on review for possible downgrade:Atlantic Mutual Insurance Company - surplus notes at Ba1, insurance financial strength at Baa1;Centennial Insurance Company - insurance financial strength at Baa1;Atlantic Lloyd's Insurance Company of Texas - insurance financial strength at Baa1;Atlantic Specialty Insurance Company - insurance financial strength at Baa1.
Atlantic Mutual Companies, based in New York, ranks among the 75 largest property-casualty insurance companies in the United States, based on premiums written. As of June 30, 2003, Atlantic Mutual Insurance Group reported a year to date statutory net loss of $5.1 million and policyholders' surplus of $467.8 million.
Moody's insurance financial strength ratings are opinions of the ability of insurance companies to punctually repay senior policyholder claims and obligations. For more information, visit our website at www.moodys.com/insurance.
New York
Ted Collins
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
James M. Bartie
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653