A.M. Best Downgrades Ratings of Lumbermen’s Underwriting Alliance

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has downgraded the financial strength rating to E (Under Regulatory Supervision) from B+ (Good) and the issuer credit rating to “rs” from “bbb-” of Lumbermen’s Underwriting Alliance (LUA) (Lee’s Summit, MO). The management company/attorney-in-fact for LUA, U.S. Epperson Underwriting Company, is located in Boca Raton, FL.

The rating downgrade reflects the order by the Missouri Department of Insurance on Feb. 27, 2015 to place the exchange under regulatory supervision. LUA’s $22.5 million deficit position, as stated in its recently filed year-end 2014 statutory balance sheet, resulted from an unexpected shortfall in collateral held related to LUA’s largest subscriber, TS Employment, Inc., which filed for Chapter 11 bankruptcy on Feb. 2, 2015 citing approximately $95 million of federal tax debt. As a result of TS Employment, Inc.’s sudden deterioration, it was determined that LUA’s collateral held was insufficient to fund its large workers’ compensation deductible under the company’s professional employer organization policy.

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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Catastrophe Analysis in A.M. Best Ratings
• Equity Credit for Hybrid Securities
• Rating Members of Insurance Groups
• Risk Management and the Rating Process for Insurance Companies
• The Treatment of Terrorism Risk in the Rating Evaluation
• Understanding BCAR for Property/Casualty Insurers

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

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 © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

A.M. Best
Robert Valenta, 908-439-2200, ext. 5291
Senior Financial Analyst
[email protected]
or
Gerard J. Altonji, 908-439-2200, ext. 5626
Assistant Vice President
[email protected]
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
[email protected]
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
[email protected]

Source: A.M. Best Company, Inc.

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