Global Indemnity Group, Inc., a subsidiary of Global Indemnity plc (GBLI), recently acquired American Reliable Insurance Company. Following the acquisition, A.M Best affirmed American Reliable Insurance Company’s ratings and revised its outlook.
A.M. Best affirmed American Reliable the financial strength rating (“FSR”) of A (Excellent) with a stable outlook.
Additionally, A. M. Best revised the outlook for American Reliable Insurance Company from positive to stable and also affirmed it issuer credit rating (“ICR”) of “a” after it was taken over by Global Indemnity earlier this month.
A.M. Best revised the outlook to stable from positive as American Reliable will become a member of the existing pooling agreement among Global Indemnity’s U.S. subsidiaries, each presently holding the FSR of A (Excellent) and an ICR of “a” with a stable outlook.
The acquisition was completed on Jan 1, 2015. Per the terms of the transaction Global Indemnity’s U.S. operations acquired the specialty personal lines and agricultural property/casualty insurance businesses of American Reliable, thereby enhancing its commercial and equine agricultural lines with negligible distributional overlap.
Moreover, A.M. Best expects that the absorption of American Reliable business in to Global Indemnity’s U.S. insurance operations will help it to diversify its insurance risks. It will also help in incrementing the profitability of the company with the addition of underwriting expertise and claims management in complementary lines of business.
Global Indemnity expects the buyout to double both the premiums and revenues of the company as well as be accretive to earnings in 2015.
Assurant, Inc. (AIZ) divested American Reliable as the high margins witnessed by the segment is not expected to continue over the long term due to regulator-mandated price cuts and improving housing market conditions which will likely lower placement rates and shrink its lender-placed book of business.
Rating affirmations or upgrades from credit rating agencies play an important part in boosting investor confidence in the stock as well as in maintaining its creditworthiness in the market. Currently, Global Indemnity carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Better-ranked stocks in the property and casualty insurance sector include The Allstate Corp. (ALL) and W.R. Berkley Corp. (WRB). Both the stocks sport a Zacks Rank #1 (Strong Buy).
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