A.M. Best Comments on NYMAGIC, INC.’s Proposed Acquisition by ProSight Specialty Insurance Holdings, Inc.
July 15 2010 - 9:41AM
Business Wire
A.M. Best Co. has commented that the financial
strength rating (FSR) of A (Excellent) and issuer credit ratings
(ICR) of “a” of New York Marine Group (NY Marine) and
its members and the ICR of ‘”bbb’” of its ultimate holding company,
NYMAGIC, INC. (NYMAGIC) (NYSE: NYM), are unchanged following
the announcement of NYMAGIC’s proposed acquisition by ProSight
Specialty Insurance Holdings, Inc. (ProSight Specialty Insurance).
The members of NY Marine include New York Marine And General
Insurance Company and Gotham Insurance Company.
In addition, A.M. Best has commented that the FSR of A-
(Excellent) and ICR of “a-” of NY Marine’s affiliate, Southwest
Marine And General Insurance Company (Southwest Marine)
(Phoenix, AZ), and the debt rating of “bbb” on $100 million 6.5%
senior unsecured bonds due March 2014 of NYMAGIC are all unchanged.
The outlook for all ratings is stable. All companies are domiciled
in New York, NY, unless otherwise specified.
Pursuant to a definitive agreement entered into with ProSight
Specialty Insurance, NYMAGIC will be merged with PSI Merger Sub
Inc., a wholly owned subsidiary of ProSight Specialty Insurance
formed for purposes of the transaction. NYMAGIC will survive the
merger as a wholly owned subsidiary of ProSight Specialty
Insurance.
ProSight Specialty Insurance was founded by Chief Executive
Officer (CEO), Joseph Beneducci and a group of senior executives
from the property/casualty industry and is backed with 100% equity
funding by investment funds managed by TPG Capital, L.P. (TPG) and
GS Capital Partners VI (GSCP). TPG and GSCP will be equal investors
in the transaction. Both TPG and GSCP are private investment
firms.
The acquisition is not expected to change the group’s debt or
underwriting leverage. Although Mr. Beneducci will assume the role
of CEO when the transaction closes and some new key managers will
assume various positions, NYMAGIC’s core underwriting and claim
management team will remain largely in place following the
acquisition. While a modest volume of new specialty business is
expected to be written, there are no plans to alter significantly
the group’s current product mix. Ultimately, the expectation is
that the group’s operations will not be significantly altered as a
result of this transaction.
NY Marine’s ratings were affirmed on June 9, 2010, reflecting
its solid capitalization, history of strong operating earnings,
reduction in catastrophe exposures and strong market niche in its
core marine business line.
Partially offsetting these positive rating factors are NY
Marine’s dependence on reinsurance, its limited surplus growth due
(in part) to dividend payments to its parent and its large
portfolio of Alt-A mortgage-backed securities representing
approximately 25% of surplus through the end of the first quarter
of 2010.
Southwest Marine’s ratings also were affirmed on June 9, 2010
and reflect the company’s strong stand-alone capitalization,
favorable operating experience over the past two years as writings
reached scale and the historical support from ’NY Marine.
Offsetting these positive rating factors is the execution risk
associated with building a profitable book of business over the
long term and modest return measures to date.
NY Marine is primarily a casualty underwriter with nearly 80% of
gross premiums attributable to marine liability, excess workers
compensation, professional liability, casualty and commercial auto
liability. Although its product mix may change somewhat as a result
of NYMAGIC’s acquisition, its core lines are expected to remain
unchanged.
The transaction is expected to close in the fourth quarter of
2010, subject to shareholder and regulatory approval.
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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