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S&P Affirms American Service Insurance Co 'BBpi' Rtg

15 October 1999

S&P Affirms American Service Insurance Co 'BBpi' Rtg

    NEW YORK--Standard & Poor's--Oct. 15, 1999-- Standard & Poor's affirmed its double-'Bpi' rating on American Service Insurance Co. Inc.
    American Service Insurance Co. Inc. is a stock company based in Rosemont, Ill., and licensed in Illinois, Indiana and Missouri. With $12.5 million in surplus, it is a small insurer, whose major line of business is nonstandard auto.
    The company is a subsidiary of the American Investment Corp. which, in 1998, entered into a share purchase agreement with Kingsway Financial Services of Toronto, Canada. Kingsway Financial currently operates through nine wholly owned subsidiaries in Canada and the United States.
    Canadian subsidiaries include Kingsway General Insurance Co., York Fire and Casualty Insurance Co., and Jevco Insurance Co.
    U.S. subsidiaries include Universal Casualty Co., American Service Insurance Co. Inc., Southern United Fire Insurance Co., Walshire Assurance Co., Hamilton Investments Inc. and Avalon Risk Management Inc. Kingsway Financial shares are publicly traded on the Toronto Stock Exchange (symbol KFS).
    The company, which markets its products primarily through independent general agents, commenced operations in 1983. Nearly all of its business is in Illinois, with the remainder in Indiana and Alabama. The company's rating is based on stand-alone characteristics.

     Major Rating Factors

     --   Capitalization is extremely strong, as indicated by Standard
          & Poor's capital adequacy ratio of 262.0%.

     --   Operating performance is modest, with a five year average
          return on revenue of 3.8%. In 1998, net premiums written
          decreased 63.1% to $14.5 million while surplus increased
          51.3% to $12.5 million.

     --   The one-year loss development to surplus ratio in 1998 was
          reported as 54.0%, a limiting factor.

     --   The company's geographic and product line concentration is
          high, with 98.3% of its direct premiums written in Illinois
          at year-end 1998. Further, the company is susceptible, on a
          gross basis, to catastrophes and storm related losses.

    '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