A.M. Best Downgrades Ratings of Kingsway Amigo Insurance Company

A.M. Best Co. has downgraded the financial strength rating (FSR) to C++ (Marginal) from B- (Fair) and the issuer credit rating (ICR) to “b” from “bb-” of Kingsway Amigo Insurance Company (Amigo) (Miami, FL). The outlook for both ratings is negative.

The rating actions follow Amigo’s year-end 2010 operating performance, which resulted in a surplus loss of more than 34%. The ratings also reflect Amigo’s weak risk-adjusted capitalization, above average financial and operating leverage and unprofitable earnings trends, caused by previous significant growth. In addition, the ratings recognize the challenges Amigo faces from strong competitive markets, weak economic conditions, declining premium volume and rising claims costs. These concerns are partially offset by Amigo’s actions to improve efficiency and customer service; improve performance by canceling unprofitable agents and accounts; focus on core nonstandard automobile insurance; and consolidate management and back-office operations.

Amigo, along with its affiliates, was sold at the end of the first quarter of 2011, through the sale of its parent, Hamilton Risk Management Company, to Acadia Acquisition Partners, LP. Kingsway America Inc. will act as the general partner and hold a limited partnership investment. Many of the aforementioned offsetting rating factors will be accentuated through this sale, most notably, the expense position and the simplified managerial structure.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology – Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; and “Rating Members of Insurance Groups.” Methodologies can be found at www.ambest.com/ratings/methodology.

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 ?“????’?© 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.