A.M. Best Downgrades Berkley Regional Group To A.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--March 21, 2000 A.M. Best Co. has downgraded to A (Excellent) from A+ (Superior) the financial strength rating of the Berkley Berkley (bûr`klē), city (1990 pop. 16,960), Oakland co., SE Mich., a suburb of Detroit; inc. 1932. It is chiefly residential. Regional Group, Greenwich, Conn.--a segment of W.R. Berkley Corp. The rating applies to the group's lead company, Berkley Regional Insurance Co., and the15 reinsured subsidiaries and affiliates; it is based on the consolidation of these companies. This rating reflects the group's earnings deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. over recent years due to intense competition, recent adverse loss-reserve development, frequent and severe weather-related losses, additional reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. costs and restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. . Losses from these events have caused a decline in surplus and an increase in overall leverage measures to a level that is inconsistent with A.M. Best's standards for "Superior" rated entities. A.M. Best believes that, although price firming in the group's primary small and middle market commercial segment has been accepted, the business remains competitive. While it appears that the group's results have bottomed out, A.M. Best believes that the available margins in this sector will enable the group to return to profitability that is consistent with its A rating, but that may fall short of "superior" standards. Further, the parent's financial leverage has increased over recent years to levels that have limited financial flexibility. Consequently, future maintenance of Berkley Group's rating depends on the success of restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). strategies as measured by improved earning trends and capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. . Nevertheless, the rating reflects Berkley Group's strong market presence in select commercial market segments and adequate capitalization despite recent deterioration due to weak operating results and existing high underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. leverage. The rating also reflects the group's extensive local market knowledge, the commitment to maintaining a stable market presence with local producers and a disciplined underwriting approach. The group also employs prudent risk management strategies and strong external reinsurance that protects it from large losses. Also recognized is the extensive restructuring in 1999 to reduce costs, build on operating synergies, improve profitability and enhance size and scale to more effectively compete. W.R. Berkley Corp. maintains diversified diversified (di·verˑ·s operations in many segments of the property/casualty business. The regional group contributes over 40% of W.R. Berkley Corp.'s total net written premium volume. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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