S&P Affirms Fitchburg Mutual Insurance Co. 'BBpi' FSR

Apr 13, 2001, 01:00 ET from Standard & Poor's

    NEW YORK, April 13 /PRNewswire/ -- Standard & Poor's today affirmed its
 double-'Bpi' financial strength rating on Fitchburg Mutual Insurance Co.
 (Fitchburg Mutual).
     The rating is based on the company's aggressive investments, marginal
 earnings, and recently declining surplus.
     Headquartered in Fitchburg, Mass., Fitchburg Mutual (NAIC: 13943) writes
 mainly homeowners multi-peril, private passenger auto liability, auto physical
 damage, and commercial multi-peril insurance.  Business in the company's major
 states of operations -- Massachusetts, New Jersey, Rhode Island, Connecticut,
 and New Hampshire -- constitute more than 96% of its total revenue, and its
 products are distributed primarily through independent general agents.  The
 company began business in 1847.
     Major Rating Factors:
 
     *     The company's 1999 unaffiliated common stock leverage is moderately
           high at 53.0% of policyholders' surplus.  More than 27% of the
           company's invested assets are invested in interest-rate-sensitive
           collateralized mortgage obligations and loan-backed bonds.
     *     Operating performance has been marginal, with a five-year average
           ROR of 1.2%.  Fitchburg Mutual's Standard & Poor's earnings adequacy
           ratio of 12.3% for year-end 1999 is marginal.  The gain in net
           income of $2.7 million in 1999 compared with the prior year was
           composed primarily of a gain of $5.0 million in net realized capital
           gains, a decline of $1.8 million in federal income tax incurred, a
           drop of $700,000 in net underwriting income, and an increase of
           $100,000 in net investment income earned.
     *     At year-end 1999, capitalization was considered adequate, as
           measured by Standard & Poor's model.  The company's surplus, which
           was $35.9 million at year-end 1999, has grown at a compound annual
           rate of 9.7% since 1992.  The gain in surplus of $5.3 million from
           1998 was composed primarily of a gain of $4.1 million in net income
           and $1.2 million in net unrealized capital gains.  It should be
           noted that the company has lost $7.1 million through the first
           three quarters of 2000.
 
     Ratings with a 'pi' subscript are insurer financial strength ratings based
 on an analysis of an insurer's published financial information and additional
 information in the public domain.  They do not reflect in-depth meetings with
 an insurer's management and are therefore based on less comprehensive
 information than ratings without a 'pi' subscript.  Ratings with a 'pi'
 subscript are reviewed annually based on a new year's financial statements,
 but may be reviewed on an interim basis if a major event that may affect the
 insurer's financial security occurs.  Ratings with a 'pi' subscript are not
 subject to potential CreditWatch listings.
     Ratings with a 'pi' subscript generally are not modified with "plus" or
 "minus" designations.  However, such designations may be assigned when the
 insurer's financial strength rating is constrained by sovereign risk or the
 credit quality of a parent company or affiliated group, Standard & Poor's
 said. -- CreditWire.
 
 

SOURCE Standard & Poor's
    NEW YORK, April 13 /PRNewswire/ -- Standard & Poor's today affirmed its
 double-'Bpi' financial strength rating on Fitchburg Mutual Insurance Co.
 (Fitchburg Mutual).
     The rating is based on the company's aggressive investments, marginal
 earnings, and recently declining surplus.
     Headquartered in Fitchburg, Mass., Fitchburg Mutual (NAIC: 13943) writes
 mainly homeowners multi-peril, private passenger auto liability, auto physical
 damage, and commercial multi-peril insurance.  Business in the company's major
 states of operations -- Massachusetts, New Jersey, Rhode Island, Connecticut,
 and New Hampshire -- constitute more than 96% of its total revenue, and its
 products are distributed primarily through independent general agents.  The
 company began business in 1847.
     Major Rating Factors:
 
     *     The company's 1999 unaffiliated common stock leverage is moderately
           high at 53.0% of policyholders' surplus.  More than 27% of the
           company's invested assets are invested in interest-rate-sensitive
           collateralized mortgage obligations and loan-backed bonds.
     *     Operating performance has been marginal, with a five-year average
           ROR of 1.2%.  Fitchburg Mutual's Standard & Poor's earnings adequacy
           ratio of 12.3% for year-end 1999 is marginal.  The gain in net
           income of $2.7 million in 1999 compared with the prior year was
           composed primarily of a gain of $5.0 million in net realized capital
           gains, a decline of $1.8 million in federal income tax incurred, a
           drop of $700,000 in net underwriting income, and an increase of
           $100,000 in net investment income earned.
     *     At year-end 1999, capitalization was considered adequate, as
           measured by Standard & Poor's model.  The company's surplus, which
           was $35.9 million at year-end 1999, has grown at a compound annual
           rate of 9.7% since 1992.  The gain in surplus of $5.3 million from
           1998 was composed primarily of a gain of $4.1 million in net income
           and $1.2 million in net unrealized capital gains.  It should be
           noted that the company has lost $7.1 million through the first
           three quarters of 2000.
 
     Ratings with a 'pi' subscript are insurer financial strength ratings based
 on an analysis of an insurer's published financial information and additional
 information in the public domain.  They do not reflect in-depth meetings with
 an insurer's management and are therefore based on less comprehensive
 information than ratings without a 'pi' subscript.  Ratings with a 'pi'
 subscript are reviewed annually based on a new year's financial statements,
 but may be reviewed on an interim basis if a major event that may affect the
 insurer's financial security occurs.  Ratings with a 'pi' subscript are not
 subject to potential CreditWatch listings.
     Ratings with a 'pi' subscript generally are not modified with "plus" or
 "minus" designations.  However, such designations may be assigned when the
 insurer's financial strength rating is constrained by sovereign risk or the
 credit quality of a parent company or affiliated group, Standard & Poor's
 said. -- CreditWire.
 
 SOURCE  Standard & Poor's