American Safety Ratings Are Under Review

June 6, 2013

A.M. Best Co. has placed under review with developing implications the financial strength rating [FSR] of A [Excellent] and issuer credit ratings [ICR] of “a” of American Safety Casualty Insurance Company [ASCIC] and American Safety Indemnity Company [ASIC], both domiciled in Oklahoma City, Oklahoma.

The ratings agency has also placed under review with negative implications the FSR of A [Excellent] and ICRs of “a” of American Safety Reinsurance, Limited [ASRe] based in Bermuda and its Vermont affiliate, American Safety Risk Retention Group, Inc.

Concurrently, A.M. Best has placed under review with developing implications the ICR of “bbb” of Bermuda’s American Safety Insurance Holdings, Ltd.

The under review status follows the June 3, 2013 announcement that Toronto’s Fairfax Financial Holdings, Ltd. and American Safety entered into a merger agreement pursuant to which Fairfax will acquire all of the outstanding shares of American Safety’s common stock. The transaction is expected to close in the fourth quarter of 2013.

The developing implications status for the ratings of ASCIC and ASIC reflect the unknowns relative to the plans for each of these entities once the transaction closes and the specialty commercial business written by each is renewed, as planned, by one of operating entities within Fairfax’s Hudson Insurance Group or the Crum & Forster Insurance Group.

A Best spokesman said: “”The negative implications status for the ratings of ASRe recognise the purchase and sale agreement that Fairfax reached with Tower Group, International, Ltd. pursuant to which Fairfax agreed to sell ASRe promptly upon acquiring it from American Safety in addition to the recent unfavorable development on ASRe prior year’s loss reserves.

“The negative implications status for the ratings of ASRRG acknowledges that it is not a party to this transaction; however, ASRe currently provides reinsurance for 80% of any net retention of ASRRG. The level of future reinsurance support for ASRRG’s business, if any, is unknown at this time.”

The Best spokesman concluded: “The developing implications status for the ICR of American Safety also represents the uncertainty relative to its future once the transaction closes.

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