AM Best Affirms Credit Ratings of Benchmark Insurance Group Members and Trean Insurance Group, Inc.
October 07 2022 - 11:50AM
Business Wire
AM Best has affirmed the Financial Strength Rating of A
(Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR)
of “a” (Excellent) of Benchmark Insurance Company (headquartered in
Wayzata, MN), Benchmark Specialty Insurance Company (Little Rock,
AR), American Liberty Insurance Company (Provo, UT) and 7710
Insurance Company (Summerton, SC). These companies are collectively
referred to as Benchmark Insurance Group (BIG). Concurrently, AM
Best has affirmed the Long-Term ICR of “bbb” (Good) of Trean
Insurance Group, Inc. (Delaware) (Trean Insurance) [NASDAQ: TIG],
the ultimate parent of BIG. The outlook of these Credit Ratings
(ratings) is stable.
The ratings of BIG reflect its balance sheet strength, which AM
Best assesses as very strong, as well as its strong operating
performance, limited business profile and appropriate enterprise
risk management (ERM).
BIG’s balance sheet strength assessment reflects a highly rated,
diversified fixed-income portfolio and consistent loss reserve
discipline offset by elevated net underwriting leverage and a
sound, albeit declining, liquidity position. The group has
significant reinsurance dependence that subjects it to material
counterparty credit risk. However, to mitigate this credit risk,
BIG holds approximately 80% in collateral on a funds-held basis or
requires collateral in a trust or as a letter of credit from
reinsurers not authorized in the insurance carrier’s state of
domicile to secure recoverable balances. The group has diversified
this credit risk related to ceded reinsurance and has no disputes
for reinsurance recoverables deemed uncollectible.
The group reported declining operating results in 2021 as a
result of several unusual underwriting losses. However, BIG’s
operating performance assessment reflects its strong overall
underwriting profitability and net investment income that has
produced double-digit pre-tax operating results and returns on
equity, which compare favorably with AM Best’s workers’
compensation composite’s five-year averages at Dec 31, 2021. In the
first half of 2022, the group reported $12.6 million of operating
income as a result of a rebound in underwriting profitability, as
reflected in its 89.5% combined ratio, which improved from 91.4% in
the first half of 2021.
AM Best views the group’s business profile as limited, as it
reflects a concentration of business in the workers’ compensation
line of business. To reduce its product concentration, BIG has
added programs in accident & health, commercial auto, general
liability and the homeowners lines of business, as well as fronting
relationships for several captive insurers. Additionally, Trean
Insurance and Beat Capital Partners Americas (Beat) announced a
strategic partnership in July of 2022 via Trean’s recently formed
subsidiary, Benchmark Specialty Insurance Company, to offer
non-admitted excess & surplus products through newly
established Beat-backed agencies.
Although BIG continues to maintain significant dependence on
reinsurance, it now retains an increased percentage of risk from
its more profitable programs. Given management’s extensive
experience in providing a market for small workers’ compensation
program carriers, BIG continues to reduce 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. The group’s ERM
framework benefits from an experienced board of directors and
executive management teams at TIG and BIG, which are cognizant of
the key elements in maintaining and enhancing a competitive
advantage in their program niche.
At June 30, 2022 and Dec. 31, 2021, Trean Insurance reported
total assets of $1.51 billion and $1.50 billion; total liabilities
of $1.10 billion and $1.08 billion; and stockholders’ equity of
$410.1 million and $421.9 million, respectively. The company’s
total liabilities include outstanding debt from a five-year credit
facility, at variable rates of interest, due May 26, 2025, of $29.6
million and $30.4 million, respectively. Adjusted and unadjusted
debt leverage to tangible capital remained at 14.6% over both time
periods. Trean Insurance’s interest coverage was 26.8 times at June
30, 2022, compared with 15.7 at Dec. 31, 2021. In August 2022, BIG
issued a $50 million 20-year unaffiliated surplus note which, if
included in the June 30, 2022 balances, produced adjusted and
unadjusted debt leverage to tangible capital of 16.8% and 36.2%
with interest coverage at 9.8 times.
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 use of Best’s Credit
Ratings, Best’s Performance Assessments, Best’s Preliminary Credit
Assessments and AM Best press releases, please view Guide to Proper
Use of Best’s Ratings & Assessments.
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 London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
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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
Al Slavin Communications Specialist +1 908 439
2200, ext. 5098 al.slavin@ambest.com
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