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S&P Assigns Motorists Mutual Insurance Co. 'Api' Rtg

4 December 1999

S&P Assigns Motorists Mutual Insurance Co. 'Api' Rtg

    NEW YORK--Standard & Poor's--Dec. 2, 1999-- Standard & Poor's today assigned its single-'Api' financial strength rating to Motorists Mutual Insurance Co.
    Motorists Mutual Insurance Co. is a regional property and casualty insurer licensed in Ohio, Indiana, Kentucky, Pennsylvania, and West Virginia. The company markets primarily private passenger automobile liability, automobile physical damage, commercial automobile liability, and homeowners' multiperil coverage. Headquartered in Columbus, Ohio, it commenced operations in 1928.
    In 1993, an agreement was forged between the company, American Hardware Mutual Insurance Co. (AHMIC), and American Merchants Casualty Co. (AMCC), to form The Motorists Mutual-American Hardware Insurance Group. The companies participate in a 100% pooling agreement. Motorists Mutual Insurance Co., as the lead company in the interaffiliated pooling arrangement, assumes all combined premiums, losses and expenses, and cedes 3% of the business to AMCC and 20% to AHMIC. In addition, a common management agreement is in place between the companies.
    All pool members share the same rating.

    Major Rating Factors:

	         --   Capitalization for the interaffiliated pool is
               extremely strong, in excess of 300% at year-end 1998,
               as measured by Standard and Poor's capital adequacy
               model.

	         --   Operating performance for the interaffiliated pool is
               good, with the average return on revenue from 1993 to
               1998 at 4%. Although earnings are good, they are below
               those of higher rated companies.

	         --   At year-end 1998, geographic and product line
               concentration for the interaffiliated pool was high,
               with the majority of direct business written in the
               midwestern states. Geographic and product line
               concentration can expose a company to regulatory,
               economic and competitive risk.

	         --   Premium income for the interaffiliated pool has
               displayed some volatility. Net premiums have decreased
               steadily in the past five years to $288 million in 1998
               from a high of $364 million in 1993. The companies have
               taken action to attract new business, improve retention
               in key states, and to introduce new product
               enhancements in certain business segments. This has
               produced favorable results in recent years.

    '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