A.M. Best Removes from Under Review and Upgrades Credit Ratings of The Warranty Group, Inc.'s Insurance Subsidiaries

A.M. Best has removed from under review with positive implications and upgraded the Financial Strength Rating (FSR) to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to "a" from "a-" of Virginia Surety Company, Inc. (VSCI) (Chicago, IL). Concurrently, A.M. Best has removed from under review with developing implications and upgraded the FSR to A (Excellent) from A- (Excellent) and the Long-Term ICR to "a" from "a-" of London General Insurance Company Limited (LGI) and London General Life Company Limited (LGL). Both companies are domiciled in Surrey, U.K. and assessed together as the TWG Europe Limited (TWGE) rating unit. The outlooks assigned to these Credit Ratings (ratings) is stable.

These rating actions follow the May 31, 2018 announcement by Assurant, Inc. (Assurant) (headquartered in New York, NY) AIZ that it has completed the acquisition of TWG Holdings Limited and its subsidiaries (TWG), including VSCI, LGI and LGL, from TPG Capital.

The ratings reflect VSCI's balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also reflect VSCI's strategic importance to Assurant. From a strategic standpoint, VSCI strengthens Assurant's position in the vehicle protection business in addition to enhancing its distribution platform. These positive rating factors are offset by the inherent credit risk associated with ceding significant portions of the business to non-rated, unauthorized captive reinsurers. The credit risk is somewhat mitigated by the use of collateral through letters of credit, trust accounts and funds held on recoverable balances.

The ratings of LGI and LGL reflect TWGE's balance sheet strength, which A.M. Best categorizes as strongest, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings benefit from the companies' strategic importance and expected integration within Assurant. In particular, A.M. Best expects TWGE to enhance Assurant's scale in its niche vehicle protection segment, and deepen its geographical footprint in Europe. A.M. Best also expects TWGE's risk-adjusted capitalization to remain at the strongest level, underpinned by good internal capital generation and financial flexibility. An offsetting rating factor in the assessment of TWGE's balance sheet strength is the relatively small and diminishing size of its balance sheet, which exposes its risk-adjusted capitalization to potential volatility. The company has a track record of good underwriting performance, with a three-year average combined ratio of 95% (2015-2017). TWGE has a niche profile in the extended warranty and accidental damage segments across Europe that has a track record of good underwriting performance. A.M. Best expects premium volumes to decline over the medium term as the group protects its underwriting margin. An additional offsetting rating factor is TWGE's highly concentrated customer base.

This press release relates to Credit Ratings 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 see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases.

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