A.M. Best Removes Ratings of Balboa, Newport E&S, Balboa Life and Balboa Life of New York From Under Review
2008-11-24 22:41:04 -
www.ambest.com - A.M. Best Co. has removed from under review with developing implications all ratings of Balboa Insurance Group (Balboa) and its property/casualty members, Balboa Insurance Company, Meritplan Insurance Company (both of Irvine, CA), Newport Insurance Company (Arizona) as well as its stand-alone subsidiary, Newport E&S Insurance Company (Newport E&S) (Plano, TX). A.M. Best also has affirmed the financial strength ratings (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of Balboa, its members and Newport E&S. The outlook assigned to these ratings is stable.
Concurrently, A.M. Best has removed from under review with developing implications all ratings of Balboa Life Insurance Company (Irvine, CA) and Balboa Life Insurance Company of New York (together known as Balboa Life) (New York, NY). Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and ICRs of "a-" of both companies. The outlook assigned to these ratings is negative.
The removal of the under review status and the stable outlook assignment to Balboa, its property/casualty members and Newport E&S reflect the organizational restructuring of the companies. Countrywide Financial Corporation (CFC) (Calabasas, CA), the former owner, was replaced by Effinity Financial Corporation, a direct subsidiary of the Bank of America Corporation (BAC) (Charlotte, NC) (NYSE: BAC). Thus, BAC removed the existing parental concerns and rating pressure on the companies. A.M. Best notes that due to the integration of the insurance operations, Balboa and Newport E&S will be challenged to continue their current excellent performance in the near to mid term.
The ratings of Balboa and Newport E&S reflect their solid capitalization, strong underwriting profitability and the organizational, operational and distribution support they derive from being part of BAC.
Offsetting these positive attributes are Balboa"s and Newport E&S" elevated underwriting leverage and significant aggregate exposure to catastrophe losses. Furthermore, while Balboa"s and Newport E&S" shift in their long-range underwriting strategy towards voluntary personal lines products allows for growth at a somewhat lower risk level with regards to concentration risk, voluntary personal lines business, either home or auto insurance, are inherently more volatile in terms of underwriting performance than the lender-placed and collateral protection business, as seen in the events of 2008.
Moreover, A.M. Best recognizes Balboa"s and Newport E&S" current focus on defining their roles within BAC, as well as outlining the strategic importance of the insurance operations as a distribution point and originator of financial products complementing BAC"s financial services activities. Balboa and Newport E&S continue to see substantial growth in their profitable lender-placed business through large national independent financial institutions. Balboa"s and Newport E&S" management expect to benefit from new business opportunities provided through BAC, which will allow Balboa and Newport E&S to sell personal lines products through BAC"s extensive internet hub and call centers. These enhancements will allow Balboa and Newport E&S to begin to alter their long-range underwriting strategies and diversify into voluntary personal lines business, including voluntary auto. Conversely, the risks inherent in executing their portions of the recently designed strategic integration plan for all insurance entities owned by BAC exists at Balboa and Newport E&S into the foreseeable future.
The negative outlook on Balboa Life"s ratings acknowledge their continued declining premium base, more recent challenges in writing business through CFC due to the downturn in the mortgage market and the companies" modest results from their strategic marketing initiatives. With direct ownership of Balboa Life by a subsidiary of BAC, issues regarding the companies" business profile remain, and in the current business environment, execution of a new business plan will be more challenging. Balboa Life continues to maintain a strong level of risk-adjusted capital, profitable operating results and an investment portfolio that has performed well in the current volatile market.
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 cts.businesswire.com/ct/CT"id=smartlink&url=http%3A%2F%2Fwww ...
A.M. Best Co.
Analysts:
Joel Silverthorn, 908-439-2200, ext. 5120
mailto:joel.silverthorn@ambest.com
or
Andrew Gold, 908-439-2200, ext. 5487
mailto:andrew.gold@ambest.com
or
Public Relations:
Jim Peavy, 908-439-2200, ext. 5644
mailto:james.peavy@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
mailto:rachelle.morrow@ambest.com
