OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has upgraded the financial strength rating to B+ (Good) from B (Fair) and issuer credit rating to “bbb-” from “bb+” of Commercial Travelers Mutual Insurance Company (Commercial Travelers) (Utica, NY). Both ratings have been removed from under review with developing implications and assigned a positive outlook.
The rating upgrades reflect Commercial Travelers’ improved operating results and financial position as of year-end 2013. Much of this improvement is attributable to the support Commercial Travelers has received since it entered into an affiliation with National Guardian Life Insurance Company (National Guardian) (Madison, WI). The positive outlook anticipates the demutualization of Commercial Travelers and acquisition by National Guardian. This process is currently being pursued by National Guardian with the New York Department of Financial Services.
National Guardian has demonstrated support for Commercial Travelers through the purchase of a $5 million surplus note issued by the company in order to bolster Commercial Travelers’ risk-adjusted capital position. National Guardian also has entered into a coinsurance agreement for 50% of Commercial Travelers’ student medical and accident business. In the fall of 2013, a large portion of Commercial Travelers’ student plan renewals outside New York were written on National Guardian paper, mitigating the impact of new business strain. Moreover, cost-sharing and shared services agreements have been implemented to allow Commercial Travelers to operate more efficiently. When the acquisition of Commercial Travelers by National Guardian is completed, A.M. Best anticipates that additional financial and operational support will be available to support new business initiatives.
Negative rating actions could occur if the demutualization and acquisition of Commercial Travelers by National Guardian is not completed.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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