Rating agency says HIG's outlook looks to be stable
A major national rating agency announced yesterday that it has rated newly sold Hawaiian Insurance & Guaranty Company Ltd.'s financial strength at B, or fair.
New Jersey-based A.M. Best Co. said the outlook remains stable for HIG, which was acquired earlier this month by Great Northwest Insurance Co. of St. Paul, Minn.
State insurance commissioner J.P. Schmidt said the upgrade was a significant step forward for HIG.
"It was something that we questioned all prospective buyers on," Schmidt said. "Great Northwest was able to achieve this rating quicker than we had anticipated."
A.M. Best said its rating reflects HIG's adequate risk-adjusted capitalization, but said the company is still highly susceptible to "low-frequency high-severity events which affect the Hawaiian Islands."
Under A.M. Best's financial strength ratings, which measure an insurer's ability to meet its obligations to policyholders, an A+ is considered superior, A excellent, B+ very good, B fair and C+ marginal.
HIG's acquisition ended months of uncertainty for some 20,000 auto, home and hurricane policyholders in Hawaii, who were in limbo while HIG scrambled to find a new owner.
State regulators took over HIG in June when its parent company, Vesta Insurance Group of Alabama, fell into difficult financial straits because of Hurricane Katrina.
At the time, Vesta's bond rating fell to C+, which is considered too low for some mortgage lending requirements.
"We are continuing to work with Great Northwest to ensure that they are up on their feet, moving ahead and taking care of everybody," said Schmidt. "There are still a lot of details to be taken care of."
Former HIG President Ernest Fukeda, meanwhile, has submitted his resignation, effective next Monday.
Fukeda said it was a personal decision to move on. He will take a position as chief operating officer of the Hawaii Employers' Mutual Insurance Co.
"I'm pleased that the sale is complete, and everyone can move forward," Fukeda said.
In its analysis of HIG, A.M. Best said Great Northwest would be able to offer management expertise as well as operational support. The rating service also said HIG would benefit from retaining the previous company's experienced claims and underwriting staff.
But time will tell how well HIG does. A.M. Best will continue to monitor HIG's quarterly performance.