A.M. Best Affirms Financial Strength Rating and Downgrades Issuer Credit Rating of Fireman’s Fund Insurance Company and

  A.M. Best Affirms Financial Strength Rating and Downgrades Issuer Credit
  Rating of Fireman’s Fund Insurance Company and Affiliates

Business Wire

OLDWICK, N.J. -- March 1, 2013

A.M. Best Co. has affirmed the financial strength rating (FSR) of A
(Excellent) and downgraded the issuer credit rating (ICR) to “a” from “a+” of
Fireman’s Fund Insurance Company (Novato, CA) and its intercompany pool
participants and reinsured affiliates, collectively referred to as Fireman’s
Fund. The outlook remains stable for all ratings.

The affirmation of the FSR recognizes the strategic importance of the U.S.
market presence of Fireman’s Fund to the global insurance operations of its
German-based ultimate parent, Allianz SE. Critical to the ratings, Fireman’s
Fund has benefitted from substantial support via capital and reinsurance from
Allianz SE, demonstrating both implicit and explicit parental assistance. The
FSR further reflects the group’s adequate level of risk-adjusted
capitalization, as well as its niche market expertise as a provider of
insurance products to high net worth individuals and in specialty commercial

The downgrade of the ICR reflects the deterioration in Fireman’s Fund’s
underwriting performance in recent years. Since 2010, the companies’
underwriting results have been negatively impacted by increased catastrophe
losses and significant adverse development of prior years’ loss reserves,
particularly those related to the group’s workers’ compensation, commercial
multi-peril and professional liability lines of business and historical
asbestos and environmental exposures. Multi-peril crop-related losses
contributed to the deterioration in underwriting performance in 2012. Net
investment income has declined in recent years as well, driven by declining
yields (reflective of the persistent low interest rate environment). The
combination of these factors has resulted in a decline in operating results,
culminating in net losses in 2011 and 2012.

While management has taken and continues to implement steps to improve
underwriting and operating performance, reported results have not reflected
these actions to date. It is expected that it will take several years for the
group to generate a sustainable, consistent profit. It is A.M. Best’s
expectation that Allianz SE will continue to provide support to the group
during this period to maintain risk-adjusted capitalization at a level that is
supportive of the ratings, and that underwriting and operating performance
will demonstrate improvement as a result of management’s actions.

A.M. Best believes Fireman’s Fund is well positioned at its current rating
level and does not anticipate favorable rating actions in the near to
mid-term. Negative rating actions may occur for Fireman’s Fund over the
near-to-midterm if there is a continued decline in the group’s underwriting
profitability, considerable deterioration in its risk-adjusted capitalization
as measured by Best’s Capital Adequacy Ratio or if A.M. Best determines that
Fireman’s Fund’s strategic importance to Allianz SE no longer warrants the
same level of rating enhancement.

The affirmation of the FSR of A (Excellent) and the downgrade of the ICR to
“a” from “a+” applies to Fireman’s Fund Insurance Company and its following
intercompany pool participants and reinsured affiliates:

  *American Automobile Insurance Company
  *National Surety Corporation
  *The American Insurance Company
  *Associated Indemnity Corporation
  *Chicago Insurance Company
  *Fireman’s Fund County Mutual Insurance Company
  *Fireman’s Fund Indemnity Corporation
  *Fireman’s Fund Insurance Company of Hawaii, Inc.
  *Fireman’s Fund Insurance Company of Ohio
  *Interstate Fire & Casualty Company

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. Key criteria utilized include: “Risk Management and the Rating
Process for Insurance Companies”; “Understanding BCAR for Property/Casualty
Insurers”; “Rating Members of Insurance Groups”; “The Treatment of Terrorism
Risk in the Rating Evaluation”; and “Catastrophe Analysis in A.M. Best
Ratings.” Best’s Credit Rating Methodology can be found at

Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more information,
visit www.ambest.com.

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


A.M. Best Co.
Adrienne Tortoriello, 908-439-2200, ext. 5088
Senior Financial Analyst
Jennifer Marshall, 908-439-2200, ext. 5327
Managing Senior Financial Analyst
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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