Powered by
Canadian-Related Releases

A.M. Best Revises Outlook to Stable for Lumbermen’s Underwriting Alliance

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating of B+ (Good) and issuer credit rating of “bbb-” of Lumbermen’s Underwriting Alliance (LUA) (headquartered in Boca Raton, FL).

The stable outlook reflects A.M. Best’s expectation that LUA will show improved operating results following its exit from Canada in 2012 and will maintain supportive risk-adjusted capitalization. No new business has been written in Canada since July 1, 2011 and all in-force premiums expired or were cancelled by October 31, 2012. While underwriting results remain exposed to weather related losses in the United States (as well as exposed to the volatility in frequency and severity trends in the workers’ compensation line of business), A.M. Best is cautiously optimistic that profitable underwriting results will be exhibited in the near term. This optimism regarding near-term underwriting results reflects LUA’s exit from the troublesome Canada property business and the higher rate levels in the current U.S. property book of business as well as A.M. Best’s expectation that results will improve in the near term.

The rating affirmations recognize LUA’s supportive capitalization, strong niche experience in providing coverages to the forest products industry and its prudent risk management strategies. These positive rating factors are offset by LUA’s poor underwriting results over the recent five-year period, driven by large property losses in Canada, weather-related losses in the United States and above-average underwriting expense ratios. Furthermore, underwriting losses and decreased investment income have significantly reduced policyholder surplus in recent years, resulting in a lower level of risk-adjusted capitalization. Some execution risk exists given the company’s significant growth in targeted classes of property business, including assisted living facilities and food processing companies.

While A.M. Best believes that LUA is well positioned at its current rating level, there could be negative pressure on the ratings and/or outlook should operating performance or risk-adjusted capitalization not improve as expected. Conversely, improvement in underwriting and operating performance could cause positive rating actions.

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

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


A.M. Best Co.
Robert Valenta, 908-439-2200, ext. 5291
Senior Financial Analyst
Gerard Altonji, 908-439-2200, ext. 5626
Assistant Vice President
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations