AM Best Affirms Credit Ratings of Benchmark Insurance Group Members and Trean Insurance Group, Inc.

AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” (Excellent) of Benchmark Insurance Company (headquartered in Wayzata, MN), Benchmark Specialty Insurance Company (Little Rock, AR), American Liberty Insurance Company (Provo, UT) and 7710 Insurance Company (Summerton, SC). These companies are collectively referred to as Benchmark Insurance Group (BIG). Concurrently, AM Best has affirmed the Long-Term ICR of “bbb” (Good) of Trean Insurance Group, Inc. (Delaware) (Trean Insurance) [NASDAQ: TIG], the ultimate parent of BIG. The outlook of these Credit Ratings (ratings) is stable.

The ratings of BIG reflect its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).

BIG’s balance sheet strength assessment reflects a highly rated, diversified fixed-income portfolio and consistent loss reserve discipline offset by elevated net underwriting leverage and a sound, albeit declining, liquidity position. The group has significant reinsurance dependence that subjects it to material counterparty credit risk. However, to mitigate this credit risk, BIG holds approximately 80% in collateral on a funds-held basis or requires collateral in a trust or as a letter of credit from reinsurers not authorized in the insurance carrier’s state of domicile to secure recoverable balances. The group has diversified this credit risk related to ceded reinsurance and has no disputes for reinsurance recoverables deemed uncollectible.

The group reported declining operating results in 2021 as a result of several unusual underwriting losses. However, BIG’s operating performance assessment reflects its strong overall underwriting profitability and net investment income that has produced double-digit pre-tax operating results and returns on equity, which compare favorably with AM Best’s workers’ compensation composite’s five-year averages at Dec 31, 2021. In the first half of 2022, the group reported $12.6 million of operating income as a result of a rebound in underwriting profitability, as reflected in its 89.5% combined ratio, which improved from 91.4% in the first half of 2021.