A.M. Best Affirms Credit Ratings of Baldwin & Lyons, Inc. and Its Subsidiaries
June 01 2017 - 2:03PM
Business Wire
A.M. Best has affirmed the Financial Strength Ratings
(FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings
(Long-Term ICR) of “aa-” of Protective Insurance Company
(PIC) and its wholly owned subsidiary, Sagamore Insurance
Company (Sagamore). These companies are collectively referred
to as the Baldwin & Lyons Group or the group. In
addition, A.M. Best has affirmed the FSR of A (Excellent) and the
Long-Term ICR of “a” of PIC’s other wholly owned subsidiary,
Protective Specialty Insurance Company (PSIC). Concurrently,
A.M. Best has affirmed the Long-Term ICR of “a-” of the
organization’s publicly traded ultimate parent, Baldwin &
Lyons, Inc. (B&L) [NASDAQ: BWINA and BWINB]. The outlook
for each of these Credit Ratings (ratings) is stable. All companies
are domiciled in Carmel, IN.
The ratings of PIC and Sagamore reflect the group’s strong
balance sheet, favorable overall operating performance and solid
market position in its core commercial trucking market. These
positive rating factors are derived from the group’s modest
underwriting leverage, disciplined underwriting practices and
strong knowledge of the national and regional commercial trucking
market. Long-standing relationships are maintained with a core
group of large trucking firms, including the group’s largest
customer, resulting from its commitment to service and product
development initiatives. In addition, the group continues to
diversify and expand its products and markets, including small
fleet trucking programs and workers’ compensation insurance, the
latter largely marketed, along with other coverages, to commercial
trucking independent contractors. These positive rating attributes
are partially offset by concerns regarding the group’s heavy
customer concentration, the potential financial fallout and risk
encountered in the event this long-standing relationship is
non-renewed or terminated and management’s recent underestimation
of losses related to its public transportation book, resulting in
material adverse loss reserve development in 2016.
Over the years, the group has benefited from its affinity
relationship with FedEx. Any material deviation in this
relationship could be detrimental to the group’s business profile.
Although the company has a very limited business scope, PSIC’s
ratings take into consideration its strategic role within the
group, its strong balance sheet and the explicit financial support
provided by PIC, which includes a financial guarantee and aggregate
stop loss coverage. In addition, PSIC’s ratings consider the
mitigation of underwriting risks through substantial
reinsurance.
These positive rating factors are offset by PSIC’s limited
business profile, weaker-than-expected operating results and its
inability to gain traction in many of the markets it penetrates.
PSIC’s catastrophe-exposed Florida business owner’s policy writings
were discontinued after 2012, which was later followed by the
termination of its largest managing general agent writing legal
professional errors and omissions business in 2015. The ratings of
B&L reflect the organization’s low financial leverage,
above-average interest coverage and fixed charge coverage ratios,
and its access to capital markets. B&L is a publicly traded
company listed on the NASDAQ.
Negative rating action could occur if the group’s operating
performance is impacted by material unfavorable investment
performance given the sizable amounts of higher risk invested
assets held by the group’s member companies. In addition, negative
rating action may occur as a result of an unforeseen change in the
group’s relationship with its largest client, or if there were
significant weakening of the balance sheet due to a loss of
surplus, which could result from an increase in claims frequency or
severity; a decline in investment values; or from adverse reserve
development.
This press release relates to Credit Ratings that have been
published on A.M. Best’s website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please see A.M.
Best’s Recent Rating Activity web page. For
additional information regarding the use and limitations of Credit
Rating opinions, please view Understanding Best’s Credit
Ratings. For information on the proper media use of Best’s
Credit Ratings and A.M. Best press releases, please view
Guide for Media - Proper Use of Best’s Credit Ratings and A.M.
Best Rating Action Press Releases.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating
Services, Inc. and/or its subsidiaries. ALL RIGHTS
RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20170601006414/en/
A.M. BestCharles M. Huber, +1-908-439-2200, ext.
5122Directorcharles.huber@ambest.comorDaniel
J. Ryan, +1-908-439-2200, ext. 5325Senior
Directordaniel.ryan@ambest.comorChristopher Sharkey,
+1-908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
+1-908-439-2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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