A.M. Best Affirms Ratings of Baldwin & Lyons, Inc. and Its Subsidiaries

OLDWICK, N.J.–(BUSINESS WIRE)– A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of Protective Insurance Company (PIC) and its wholly owned subsidiary, Sagamore Insurance Company (Sagamore). In addition, A.M. Best has affirmed the FSR of A (Excellent) and ICR of “a” of PIC‘s other wholly owned, separately rated subsidiary, Protective Specialty Insurance Company (PSIC). Collectively, these three companies are referred to as Baldwin & Lyons Group (the group).

Concurrently, A.M. Best has affirmed the ICR of “a-” of the group’s ultimate publicly traded parent, Baldwin & Lyons, Inc. [NASDAQ: BWINA and BWINB]. The outlook for all ratings is stable. All companies are domiciled in Indianapolis, IN.

The ratings of PIC and Sagamore reflect the group’s superior risk-adjusted capitalization, historically excellent operating performance and solid market position in its core commercial trucking market. These positive rating factors are derived from the group’s modest underwriting leverage, disciplined underwriting practices and solid market presence within the national and regional commercial trucking market. Long-standing relationships are maintained with a core group of large trucking firms, including the group’s largest customer, resulting from its commitment to service and product development initiatives, which somewhat offsets concerns regarding customer concentration. In addition, the group increasingly operates as a diversified carrier through its expansion of products and markets, including non-standard personal automobile coverage, small fleet trucking programs, assumed property reinsurance, and more recently, professional lines errors and omissions (PL E&O) insurance, and workers’ compensation insurance, the latter largely marketed, along with other coverages, to commercial trucking independent contractors. Historically, the group’s emphasis on disciplined underwriting and loss control has led to solid underwriting profitability and substantial loss reserve redundancies on prior accident years.

These positive rating attributes are partially offset by the long-term competitive nature of the group’s core commercial trucking and non-standard personal automobile markets; elevated exposure to investment variability due to above-average common stock and limited partnership investments; variability in earnings due to catastrophe losses; below-average net yield on investments; the shareholder dividend requirements of Baldwin & Lyons, Inc.; and the degree of concentration with its largest customer. While growth in the group’s Florida business owners policies (BOP) and assumed property reinsurance business in recent years diversified revenues, the growth added a new potential source of variability in results through exposure to natural catastrophes, as evidenced in the group’s assumed property reinsurance business in 2010 and 2011. In 2012, the group terminated two assumed property reinsurance programs and began terminating all of its Florida BOP …read more

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