DUFF & PHELPS: LEGION INSURANCE COMPANY CLAIMS PAYING ABILITY RATED 'A+'
CHICAGO, March 25 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has rated the claims paying ability of the Legion Insurance Company (Legion) `A+' (Single-A-Plus). This high claims paying ability rating reflects the company's controlled management of underwriting risk, high quality investment portfolio, and low level of operating leverage. Partially offsetting these positives are Legion's heavy reliance on its reinsurers and the resulting level of credit risk, and the company's concentration in a single line of business. Legion is ultimately wholly owned by Mutual Risk Management Ltd. (Mutual Risk), a publicly traded company with shares listed on the New York Stock Exchange. Mutual Risk provides risk management services to clients seeking an alternative to the traditional commercial insurance market for certain of their risk exposures. Legion is a Pennsylvania-domiciled company, licensed in 48 states, with 1992 year end policyholders' surplus of $62 million. The company's principal line of business is workers' compensation insurance, which represented 86.7 percent of the $66 million of net premium written during 1992. In addition to providing workers' compensation insurance, Legion also writes medical malpractice insurance, general liability insurance, and commercial auto insurance. Legion writes the majority of its business in conjunction with Mutual Risk's Insurance Profit Center (IPC) programs. The IPC program allows the client the ability to retain a significant portion of its own loss experience without the administrative costs and capital commitment necessary to establish and operate its own captive. Legion issues an insurance policy to the client, which either fulfills a legal requirement that the client have a policy from a licensed insurer or satisfies a business need the client may have for such an admitted policy. As the primary insurer, Legion does not underwrite the risk for its own account in a traditional sense. The bulk of underwriting risk is either assumed by the client through the IPC program, or ceded to unaffiliated insurers. At the end of 1992, total reinsurance recoverables were 460.3 percent of policyholders' surplus. Of the total amount outstanding, 72.3 percent was with affiliated reinsurers or a captive reinsurer of a large medical malpractice program, and were secured by cash funds and irrevocable letters of credit issued or confirmed by member banks of the United States Federal Reserve System. Of the remaining recoverables most are with unaffiliated reinsurers, who in aggregate appear financially sound. Legion employs a conservative level of operating leverage. The company's net written premium to policyholders' surplus, was 1.1 to 1 at the end of 1992. Legion's ultimate parent, Mutual Risk, uses a conservative level of financial leverage and has demonstrated ability to access additional financing in the capital markets. At the end of 1992, all of Legion's invested assets were in bonds, short term investments, or cash. All fixed income investments were investment grade, with NAIC class one bonds representing 98.9 percent of the total. The company's investment policy does not allow for investments in fixed income securities with credit ratings below `A' (Single-A). The fixed income portfolio provides above average liquidity with 50.3 percent of the portfolio maturing within five years, and 89.4 percent within 10 years. -0- 3/25/93 /CONTACT: Timothy A. Bienek of Duff & Phelps Credit Co., 312-368-3192/ (MM)
CO: Legion Insurance Company; Mutual Risk Management Ltd. ST: Pennsylvania, New York IN: INS SU: RTG
WB -- NY048 -- 9578 03/25/93 12:15 EST
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|Date:||Mar 25, 1993|
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