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Insurance industry

A.M. Best Downgrades Magna Insurance Co.'s Financial Strength Rating

Strategic Insights

— 1 min read

A.M. Best Co. has downgraded the financial strength rating (FSR) of Magna Insurance Co. from B++ (Very Good) to B+ (Very Good) due to the company's lack of clear business strategy since its acquisition by Hancock Holding Co. in late 2003. Despite showing profitability in 2005 and the third quarter of 2006, Magna's business has been limited, and its recent profitability has been driven by investment income and reduced surplus strain. A.M. Best will monitor the company's progress and expects Magna to develop a clear business strategy and report more favorable premium and earnings trends in the near term.

Key Takeaways:

  • A.M. Best downgraded Magna Insurance Co.'s financial strength rating (FSR) from B++ (Very Good) to B+ (Very Good) due to the company's unclear business strategy since its acquisition by Hancock Holding Co. in late 2003.
  • Magna Insurance Co. showed profitability in 2005 and the third quarter of 2006, but its recent profitability has been driven by investment income and reduced surplus strain.
  • The company has limited its business production in recent years and needs to develop a clear business strategy concerning its credit business lines.
  • A.M. Best will monitor Magna's progress and expects the company to report more favorable premium and earnings trends in the near term.
  • Magna continues to maintain favorable risk-adjusted capitalization as measured by A.M. Best's capital adequacy ratio model.

Statistics:

  • A.M. Best downgraded Magna Insurance Co.'s financial strength rating from B++ (Very Good) to B+ (Very Good).
  • Magna Insurance Co. showed profitability in 2005 and the third quarter of 2006.
  • The company's recent profitability has been primarily driven by investment income and reduced surplus strain.
  • Magna has dramatically limited its business production in recent years.
  • A.M. Best's capital adequacy ratio model shows that Magna continues to maintain favorable risk-adjusted capitalization.

Sources:

  • A. M. Best Co.
  • A.M. Best's Ratings
  • Hancock Holding Co.
  • Magna Insurance Co.

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