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-AM Best changes Palisades Group's outlook to "negative".

BANKING AND CREDIT NEWS-January 24, 2011--AM Best changes Palisades Group's outlook to "negative"(C)2011 M2 COMMUNICATIONS http://www.m2.com

24 January 2011 - AM Best changed on Friday to "negative" from "stable" the outlook on the financial strength ratings (FSRs) and issuer credit ratings (ICRs) of US Palisades Group and its members, while affirming the ratings at B++ (excellent) and "bbb", respectively.

The move also concerns Palisades Insurance Co, Palisades Property and Casualty Insurance Co, Palisades Safety and Insurance Association, High Point Preferred Insurance Co, High Point Property and Casualty Insurance Co, High Point Safety and Insurance Co, Twin Lights Insurance Co and Teachers Auto Insurance Company of New Jersey and the group's currently separately rated affiliate, High Point Preferred Insurance Co. The lead member of the Palisades group is Palisades Safety and Insurance Association.

The revised outlook reflects Palisades' adequate risk-adjusted capitalisation, declining operating performance over the recent five-year period and the 2010 decline in policyholders' surplus, the service specified. The group has reported four years of underwriting losses, while maintaining elevated underwriting and loss reserve leverage, and a dependence on reinsurance. The group's business is concentrated exclusively in New Jersey, which exposes it to potentially unfavorable judicial decisions, regulatory actions, increased competitive market conditions and catastrophic weather-related losses, AM Best added.

The underwriting losses in 2010 resulted from frequent and severe winter weather events, which were within the company's catastrophe retention. In addition, Palisades experienced an increased frequency of automobile liability losses.

Offsetting factors include Palisades' well-established market position and extensive local market expertise as a leading writer of personal lines business in New Jersey, the agency added.

The affirmation of Preferred's ratings recognise its generally favourable performance in the homeowners' book of business, as well as its adequate capitalisation, which is offset by catastrophe exposure and the rating factors in Palisades.

The assignment of separate ratings to Preferred is the result of a change in its strategic position within the Palisades group as a result of its 1 January 2011 reorganisation wherein, High Point Property and Casualty Insurance Company (High Point) replaced Preferred as the lead High Point company within the Palisades group of companies. Going forward, Preferred will be the writer of the High Point group's homeowners' business, AM Best added.

((Comments on this story may be sent to info@m2.com)).END.PUB430>PDJanuary 24, 2011>JNBANKING AND CREDIT NEWS.PRICEDATENOT APPLICABLE.DAY

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Publication:M2 Banking & Credit News (BCN)
Date:Jan 24, 2011
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