A.M. Best Affirms Ratings of NYMAGIC, Inc. and Its Subsidiaries
June 09 2010 - 4:10PM
Business Wire
A.M. Best Co. has affirmed the financial strength rating
(FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of
New York Marine Group (NY Marine). The ratings also apply to
the two members of the group, New York Marine and General
Insurance Company (NY Marine) and Gotham Insurance
Company (Gotham) (both of New York, NY). A.M. Best also has
affirmed the FSR of A- (Excellent) and ICR of “a-” of Southwest
Marine and General Insurance Company (Southwest) (Phoenix, AZ),
which was formed in 2006 to write excess and surplus lines and
surety business for the group. Concurrently, A.M. Best has affirmed
the ICR of “bbb” and the debt rating of “bbb” of the $100 million,
6.5%, senior unsecured bonds due March 2014 issued by the parent
company, NYMAGIC, Inc. (NY MAGIC) (New York, NY) [NYSE:
NYM]. The outlook for all ratings is stable.
The ratings reflect NY Marine’s solid capitalization, derived
from historically conservative underwriting leverage, history of
strong operating earnings, management’s efforts to decrease its
catastrophe exposures, proven ability to quickly adapt to changing
market conditions and a strong market niche in its core marine
business line. Although in recent years, the group’s other
liability writings have surpassed that of its marine book.
Partially offsetting these positive rating factors is NY
Marine’s dependence on reinsurance, the decreased (although
somewhat improved) financial flexibility at NY MAGIC following its
$32.5 million capital contribution to NY Marine in 2008 and the
company’s limited capital growth over the years. This contribution
followed significant losses in that year due to both realized and
unrealized capital losses. As results improved in 2009 on
profitable underwriting results and realized capital gains, the
group paid a dividend to its parent holding company, which served
to somewhat improve NY MAGIC’s stand-alone liquidity.
The group’s limited surplus growth has been hindered by dividend
payments that have represented a significant portion of earnings
for NY Marine. Furthermore, the group has a large portfolio of
Alt-A mortgage-backed securities representing approximately 32% of
year-end 2009 surplus. These securities have lost significant
market value due to the turmoil within the housing and credit
markets. Nonetheless, NY Marine holds a super senior position
within these securities, significantly lowering the risk of
default. As such, the majority of the risk presented by these
securities is their illiquidity, although NY Marine plans on
holding these securities to maturity. In addition, and although the
group does have exposure to the Deepwater Horizon Gulf Coast oil
spill, the majority of its loss is ceded to third party reinsurers
and is not expected to materially impact 2010 results at this
time.
For Best’s Credit Ratings, an overview of the rating process and
rating methodologies, please visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings,
including any additional methodologies and factors that may have
been considered, can be found at
www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service
credit rating organization dedicated to serving the financial and
health care service industries, including insurance companies,
banks, hospitals and health care system providers. For more
information, visit www.ambest.com.
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