S&P Affirms Sentry Ins a Mutual Co, Mbrs `AApi' FSR

Business Wire, Feb 1, 2001

Business Editors

NEW YORK--(BUSINESS WIRE)--Standard & Poor's CreditWire

Feb. 1, 2001--Standard & Poor's today affirmed its double-'Api' financial strength ratings on Sentry Insurance, a Mutual Co. (SIAMCO), related pool members Dairyland Insurance Co. and Middlesex Insurance Co., and fully reinsured affiliates Dairyland County Mutual Insurance Co. of Texas (NAIC: 26441), Patriot General Insurance Co. (NAIC: 23442), and Sentry Lloyd's of TX (NAIC: 43370).

In addition, Standard & Poor's today assigned its double-'Api' financial strength rating to Sentry Select Insurance Co., a new pool member, and recently acquired, fully reinsured affiliates Rock River Insurance Co. and Sentry Casualty Co. The five reinsured members of the group cede 100% of their premiums to the pool.

Key rating factors include extremely strong capitalization and operating performance, significant market presence, and a strong but volatile reserve position. Based in Stevens Point, Wisc., SIAMCO (NAIC: 24988) writes mainly standard and nonstandard private passenger auto and inland marine. In addition, the company offers commercial auto and workers' compensation products designed for small, middle-market, and national commercial accounts. The company participates in an interaffiliated pooling arrangement with Dairyland Insurance Co. (NAIC: 21164; 20%), Middlesex Insurance Co. (NAIC: 23434; 10%), and Sentry Select Insurance Co. (NAIC: 21180; 10%), with the remaining 60% allocated to SIAMCO.

The group's major states of operations -- Wisconsin, Texas, Florida, Massachusetts, and Georgia -- constitute more than 35% of its business, and its products are distributed primarily by means of direct marketing. The company was founded in 1904 by members of the Wisconsin Retail Hardware Association, and is licensed in all 50 states, the District of Columbia, and Canada. SIAMCO is the ultimate parent of all companies in Sentry Insurance Group, a very large insurance group with a 1999 surplus of $1.8 billion. In September 1999, SIAMCO acquired 100% of the outstanding common stock of the John Deere Insurance Group Inc. (renamed Sentry Insurance Holding Co.) and its subsidiary companies, including Sentry Select Insurance Co. (formerly John Deere Insurance Co.), Sentry Casualty Co. (NAIC: 28460; formerly John Deere Casualty Co.), and Rock River Insurance (NAIC: 21199).

Major Rating Factors:

-- At year-end 1999, consolidated capital adequacy as measured by Standard &
Poor's capital adequacy model was extremely strong. The company's surplus has
grown at a compound annual rate of 11.3% since 1992.

-- Group operating performance has been strong, with a five-year average ROR of
10.4%. The group's accumulated earnings are good at 38% of assets. The drop in
net income of $32.0 million in 1999, compared with the prior year, was caused
primarily by a decline of $57.0 million in net underwriting income, an
improvement of $37.5 million in net investment income earned, net realized
capital losses of $32.8 million, a benefit of $25.5 million in the company's
federal income tax provision, a decline of $10.0 million in other income, and a
reduction of $4.8 million in dividends paid.

-- The group has a sizable market presence. Total 1999 net premiums written
amounted to $1.25 billion.

-- The group has strong reserves with a consistently favorable two-year loss
reserve development. The average reserve release has been 20.8% with respect to
surplus since 1995. The reported ratios, however, have been volatile, ranging
from 24.5% redundant (negative development) to 14.2% redundant over this time
period.

The rating is based on the 1999 reported consolidated financial statements of the Sentry Insurance Group.

Ratings with a 'pi' subscript are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. Ratings with a 'pi' subscript are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings.

Ratings with a 'pi' subscript generally are not modified with "plus" or "minus" designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said. -- CreditWire.