A.M. Best comments on Kingsway’s plan to buy Mendota

A.M. Best Co.’s issuer credit rating (ICR) of “bbb-” for Kingsway Financial Services Inc. (Kingsway) (Mississauga, Ontario) [TSX/NYSE: KFS] remains unchanged following Kingsway’s announcement that it intends to acquire the Mendota Insurance Company (Mendota), a wholly owned subsidiary of The St. Paul Travelers Companies, Inc. [NYSE: STA].
The transaction includes Mendota’s wholly owned subsidiaries, Mendakota Insurance Company and Mendota Insurance Agency, Inc., both domiciled in Minnesota.
The outlook for Kingway’s ICR is stable.
“Based upon information that Kingsway provided to A.M. Best, the transaction is not expected to have a material impact on the company’s consolidated capitalization,” A.M. Best reported in an online posting. “While Kingsway will be challenged to integrate Mendota’s employees and data into their culture and systems, Kingsway’s management team has a history of successful growth through acquisitions.”
A.M. Best anticipates the transaction will be completed in 2007 Q2.
In the meantime, A.M. Best announced it has placed the financial strength ratings (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a” of both Mendota and Mendakota “under review with negative implications.”
Both companies currently participate in the TNC Insurance Group, a sub-group of The St. Paul Travelers Companies, Inc. (St. Paul Travelers) (St. Paul, MN) [NYSE: STA].
“The placing of the [Mendota and Mendakota] ratings under review primarily reflects that upon the completion of the sale of these companies, they will no longer be part of the TNC Insurance Group pool and St. Paul Travelers, and will be evaluated based upon their strategic positioning within Kingsway,” A.M. Best commented online. “The FSRs of A (Excellent) and the ICRs of “a” of TNC Insurance Group are unchanged by this planned transaction.”
A.M. Best said the ratings of Mendota and Mendakota will remain under review pending regulatory approval and completion of the transaction.