MLAN Midland Co (MM)

A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of American Modern Insurance Group (American Modern) and its property/casualty affiliates. A.M. Best has also affirmed the financial strength rating of A- (Excellent) of American Modern's life/health affiliate. Concurrently, A.M. Best has affirmed the issuer credit rating (ICR) of "a-" and debt ratings of "a-" on senior debt, "bbb+" on subordinated debt and "bbb" on preferred stock to the $150 million shelf registration filed by American Modern's parent, The Midland Company (Midland) (NASDAQ: MLAN). Additionally, A.M. Best has assigned ICRs of "aa-" to American Modern and its property/casualty affiliates and "a-" to its life/health affiliate. All companies are located in Amelia, OH. All ratings have a stable outlook. The property/casualty ratings reflect American Modern's superior capitalization, favorable operating performance and niche strategy in providing insurance products for manufactured housing, motor sport vehicles and financial services products. The group continues to maintain a strong surplus position given the short-tail property focus and low volatility in loss reserves. Management has improved underwriting results in several key specialty product lines by re-underwriting, rate increases, product redesigns and automation. This has led to pre-tax returns on revenue and equity that compare favorably to the property lines industry composite. The ratings also acknowledge the modest financial leverage of Midland with total debt-to-adjusted capitalization of approximately 19% and fixed coverage ratios of approximately nine times. Partially offsetting these positive rating factors is the group's elevated premium leverage and above average expense levels in relation to the property lines industry composite. Elevated premium leverage is a result of moderate exposure growth and dividends to Midland. Expense levels are primarily attributable to the group's competitive commission structure, particularly in terms of its profitability-based incentives. American Modern and its property/casualty affiliates also continue to have approximately 50% of their premium writings in the manufactured housing segment and therefore, exposing them to catastrophe losses. However, strict adherence to underwriting guidelines and a continued extensive reinsurance program have reduced the potential exposure to severe shock losses. The rating of American Modern's life/health affiliate is based on a positive statutory operating earnings trend, a high credit-quality investment portfolio and favorable risk-adjusted capitalization. This rating also recognizes the life/health affiliate's strategic position within the American Modern Insurance Group and Midland's financial support of the life/health operation. The financial strength rating of A+ (Superior) has been affirmed and issuer credit ratings of "aa-" have been assigned to American Modern Insurance Group and its following property/casualty affiliates: -- American Modern Home Insurance Company -- American Family Home Insurance Company -- American Southern Home Insurance Company -- American Western Home Insurance Company -- G.U.I.C. Insurance Company -- American Modern Lloyds Insurance Company The financial strength rating of A- (Excellent) has been affirmed and an issuer credit rating of "a-" has been assigned to the life/health affiliate of American Modern Insurance Group, American Modern Life Insurance Company. The issuer credit rating of "a-' has been affirmed for The Midland Company. The following debt ratings have been affirmed under the $150 million shelf registration: The Midland Company-- -- "a-" on senior unsecured -- "bbb+" on subordinated -- "bbb" on preferred stock For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings. For current Best's Ratings, independent data and analysis on more than 3,000 individual property/casualty companies, groups and industry composites, please visit http://www.ambest.com/pc. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.