S&P Lowers International Indemnity Co. Rating to ``Bpi''
4 January 2001
S&P Lowers International Indemnity Co. Rating to ``Bpi''
NEW YORK--Jan. 4, 2001--Standard & Poor's Thursday lowered its financial strength rating on International Indemnity Co. (International Indemnity) to single-"Bpi" from double-"Bpi."The rating action reflects a writedown of assets by the parent, Queensway Financial Holdings, Ltd. (Queensway) of Toronto, producing a 50% decline in surplus, weak and volatile operating performance and a low liquidity ratio.
Based in Atlanta, International Indemnity (NAIC:35777) writes nonstandard private passenger auto, commercial auto, and motorcycle insurance and worker's compensation, and, on a surplus lines basis, offers general liability, property/package and auto physical damage coverages.
In March 2000, the company announced the sale of the renewal rights to its private passenger nonstandard auto line to Mendota Insurance Co. In November 2000, the parent announced its further exit from the commercial auto liability market in southern Florida.
More than 95% of the company's business lies within its major states of operation (Georgia, Tennessee and Texas) and its products are distributed primarily through brokers. The company, which began business in 1977, is licensed in 35 states and the District of Columbia and is an authorized surplus lines writer in Florida and Louisiana.
It is a member of Sun States Insurance Group (Sun States Group), a subsidiary of Queensway. Queensway is a specialty insurance group operating through a number of subsidiaries located in the United States and Canada and providing a range of individual and commercial insurance coverages. It is publicly traded on the Toronto Stock Exchange (TSE) under the symbol QFH.
The company owns 100% of the common stock of Queensway International Indemnity Co. (financial strength rating single-"Bpi"). All 1.5 million outstanding common shares of the company's 10 million authorized shares are owned by Sun States Insurance Inc., an insurance holding company domiciled in Delaware.
Major Rating Factors:
| -- | On Nov. 16, 2000, Queensway announced the writedown of certain assets in the Sun States Group that effectively, on a statutory basis, reduced International Indemnity's surplus position. The company's 1999 affiliated common stock leverage was reported at 79.2% of policyholders' surplus. The company's surplus, which stood at $20.1 million at year-end 1999, was reported to be $10.0 million as of June 2000. This $10.0 million decline was primarily the result of an $8.8 million decline in nonadmitted assets, a $1.7 million aggregate write-in for losses to surplus, a net unrealized capital loss of $0.2 million, and a $0.6 million increase in net income. |
| -- | The 1999 NAIC risk-based capital ratio was significantly below the industry median at 119.8%. |
| -- | Operating performance has been weak with a five-year average return on revenue of negative 3.9% and a time-weighted return on revenue from 1996-1999 of negative 4.3%. In addition, the company has volatile returns with, for example, return on assets ranging from negative 7.5% to 2.1% for the years 1998 and 1997, respectively. This is a limiting factor. The company's liquidity ratio is also considered vulnerable at 41.1%. |
The company is a member of Queensway Financial Group, which is currently experiencing debt servicing difficulties. The rating does not include additional credit for implied group support.
Ratings 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.
Ratings with a "pi" subscript 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