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S&P Assigns Arbella Mutual Insurance Co. 'BBBpi' Rtg

18 October 1999

S&P Assigns Arbella Mutual Insurance Co. 'BBBpi' Rtg

    NEW YORK--Standard & Poor's--Oct. 18, 1999-- Standard & Poor's assigned its triple-'Bpi' financial strength rating to Arbella Mutual Insurance Co.
    Arbella Mutual Insurance Co. is a mutual company based in Quincy, Mass., licensed only and operating only in Massachusetts. Its major lines of business are private passenger auto, homeowners multi-peril, and related extended perils (fire and inland marine).
    The company is also a servicing carrier for Commonwealth Automobile Reinsurers, the automobile residual market mechanism for both private passenger and commercial auto in the commonwealth of Massachusetts. It also participates in the Massachusetts FAIR plan. The company, which distributes its products primarily through independent general agents, commenced operations in 1988.
    Arbella Mutual Insurance Co. is a member of Arbella Insurance Group, a large domestic insurance group with surplus of $240.6 million. Nevertheless, the rating does not include additional credit for implied group support. Major Rating Factors:

--   Capitalization is more than adequate, as indicated by Standard &
     Poor's capital adequacy ratio of 158.0%. However, the NAIC
     risk-based capital ratio is good, at 220.7%, but below the
     industry median.

--   The company has demonstrated stable earnings usually associated
     with larger firms (surplus $240.6 million), but operating
     performance has been modest, with the time-weighted return on
     revenue from 1994-1998 at 3.9%.

--   The company's two-year development on reserves with respect to
     policyholder surplus has displayed more volatility than for
     higher rated companies.

--   This company's geographic and product line concentration is high,
     with 100.0% of its direct premiums written in Massachusetts at
     year-end 1998, along with exposure to catastrophes on a gross
     basis.

    'Pi' ratings, denoted with a 'pi' subscript, are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript.
    'Pi' ratings are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings.
    Ratings with a 'pi' subscript generally are not modified with 'plus' or 'minus' designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said. ---CreditWire