AM Best Assigns Issuer Credit Rating to Trean Insurance Group, Inc.; Affirms Credit Ratings of Benchmark Insurance Group Memb...
August 18 2020 - 3:02PM
Business Wire
AM Best has assigned a Long-Term Issuer Credit Rating
(Long-Term ICR) of “bbb” to Trean Insurance Group, Inc. (Delaware)
[NASDAQ:TIG]. The outlook assigned to this Credit Rating (rating)
is stable. Concurrently, AM Best has affirmed the Financial
Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of
“a” of Benchmark Insurance Company (BIC) (headquartered in
Wayzatia, MN) and American Liberty Insurance Company (ALIC) (Provo,
UT), subsidiaries of Trean Insurance Group, Inc., the ultimate
parent. The outlook of these ratings is stable. BIC and ALIC are
members of Benchmark Insurance Group (BIG). These rating actions
follow an initial public offering (IPO) for Trean Insurance Group
Inc. (Trean) on July 21, 2020.
Prior to the IPO, Trean was renamed from the combined entities
Trean Holdings, LLC and BIC Holdings, LLC, and re-domesticated to
Delaware from Kansas and Minnesota, respectively. Subsequently,
Trean became the ultimate parent, as BIC Holdings LLC, the former
ultimate parent, was eliminated. Approximately $95 million of
capital was raised net of expenses. The proceeds from the capital
raise will be used to repay outstanding debt, general corporate
purposes and to fund future growth. Trean’s financial leverage
measures, as a percent of unadjusted and adjusted total debt to
tangible capital, are 22.4% and 19.4%, respectively, with interest
coverage of approximately 17x earnings before interest and taxes.
All measures are within AM Best’s guidelines for the ratings.
The ratings of BIG reflect its balance sheet strength, which AM
Best categorizes as very strong, as well as its strong operating
performance, limited business profile and appropriate enterprise
risk management (ERM).
BIG’s balance sheet assessment reflects moderate net
underwriting leverage, a sound liquidity position, a highly rated,
diversified fixed income portfolio and consistently favorable loss
reserve development. However, the group has significant reinsurance
dependence that subjects it to material counterparty credit risk.
To mitigate this credit risk, BIG holds collateral on a funds held
basis, or requires collateral in a trust or as a letter of credit,
to secure recoverable balances from reinsurers not authorized in
the insurance carrier’s state of domicile. The group has
diversified this credit risk related to ceded reinsurance and has
no disputes for reinsurance recoverables deemed uncollectible.
The strong operating performance assessment reflects the group’s
consistent underwriting profitability and rising net investment
income that has produced double-digit returns on revenue and
equity, which compares favorably to the five-year average workers’
compensation composite’s measures.
AM Best views the group’s business profile as limited, as it
reflects a concentration of business in the workers’ compensation
line of business and geographic concentration in California, where
approximately 52% of its business is generated. As noted above, BIG
also maintains significant dependence on reinsurance. However,
given management’s extensive experience in providing a market for
small workers’ compensation program carriers, it has reduced its
overall credit risk to a manageable level with risk management
capabilities in line with its business profile.
AM Best views BIG’s ERM structure as appropriate, as the group’s
program includes risk appetite and tolerance statements that focus
on concerns specific to its business profile. Risk management
benefits from and experienced management team cognizant of the key
elements in their chosen niche.
This press release relates to Credit Ratings that have been
published on AM 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 AM Best’s Recent Rating
Activity web page. For additional information regarding the use and
limitations of Credit Rating opinions, please view Guide to Best’s
Credit Ratings. For information on the proper media use of Best’s
Credit Ratings and AM Best press releases, please view Guide for
Media - Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in New York, London,
Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more
information, visit www.ambest.com.
Copyright © 2020 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Kevin Dorsey Senior Financial Analyst +1 908
439 2200, ext. 5401 kevin.dorsey@ambest.com
Christopher Sharkey Manager, Public Relations +1 908
439 2200, ext. 5159 christopher.sharkey@ambest.com
Joseph Burtone Director +1 908 439 2200, ext.
5525 joseph.burtone@ambest.com
Jim Peavy Director, Public Relations +1 908 439
2200, ext. 5644 james.peavy@ambest.com
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