A.M. Best Upgrades Ratings of California Insurance Company and Its Affiliates

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A.M. Best Upgrades Ratings of California Insurance Company and Its Affiliates

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has upgraded the financial strength rating (FSR) to A+ (Superior) from A (Excellent) and issuer credit ratings (ICR) to "aa-" from "a+" of California Insurance Company (San Francisco, CA), Continental Indemnity Company (Cedar Rapids, IA) and Illinois Insurance Company (Cedar Rapids, IA). The outlook for these ratings is stable.

In addition, A.M. Best has upgraded the FSR to A+ (Superior) from A (Excellent) and the ICR to "aa-" from "a" while removing them from under review with developing implications for Pennsylvania Insurance Company (Pennsylvania) (Cedar Rapids, IA). The outlook assigned to both ratings is stable. All companies are collectively referred to as North American Casualty Group (NAC).


The ratings upgrade reflects NAC's excellent risk-adjusted capitalization, favorable operating performance since its inception and experienced management team. The ratings also acknowledge management's prudent operating philosophy, adherence to adequate pricing and reserving discipline, and strategic business plans and projections that call for near-term earnings and capital accumulation. The ratings also consider the historical performance of business produced by its parent company, Applied Underwriters, Inc. (Applied), a leading provider of bundled workers' compensation insurance and payroll processing services to small and medium-sized businesses. A.M. Best anticipates that Applied will continue to support NAC, allowing the group to maintain a level of risk-adjusted capitalization that remains supportive of its ratings. Lastly, the ratings also recognize the additional financial flexibility and support provided by NAC's publicly traded ultimate parent, Berkshire Hathaway Inc. [NYSE: BRK.A and BRK B]. The upgrading of the ratings for Pennsylvania reflects its inclusion into the NAC intercompany reinsurance pooling arrangement whereby all premiums, losses and expenses are shared among the pool members.

The positive factors are somewhat offset by NAC's relatively limited operating experience and the group's significant business and geographic concentration risk operating predominately as a workers' compensation insurer with limited geographic spread. This concentration exposes operations to a higher level of potential regulatory, judicial, legislative and competitive risks than that of more diversified competitors. Despite these concerns, the outlook reflects the group's strong level of risk-adjusted capitalization, strong operating results since inception and management's ability to adapt quickly to new or changing conditions.

While NAC is well positioned at its current rating level, negative rating actions could result if operating performance falls markedly short of A.M. Best's expectations, if there is a considerable deterioration in risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio, or if A.M. Best determines that the group's strategic importance to its parent no longer warrants rating enhancement.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visitwww.ambest.com.

Copyright © 2013 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.



A.M. Best Company, Inc.
Robert Valenta, 908-439-2200, ext. 5291
Senior Financial Analyst
robert.valenta@ambest.com
or
Gerard Altonji, 908-439-2200, ext. 5626
Assistant Vice President
gerard.altonji@ambest.com
or
Rachelle Morrow,908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

KEYWORDS:   United States  Europe  North America  New Jersey

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