[November 15, 2012]

A.M. Best Affirms Ratings of Fair American Insurance and Reinsurance Company

A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit rating (ICR) of "a" of Fair American Insurance and Reinsurance Company (FAIRCO) (New York, NY). The outlook for the FSR is stable, while the outlook for the ICR is positive.

The affirmations are based on FAIRCO's recently executed quota share agreement with its parent company, Transatlantic Reinsurance Company (Transatlantic) (New York, NY), which will cede 90% of all ongoing business to its parent. Simultaneously, all prior FAIRCO business was effectively commuted.

Going forward, FAIRCO will focus on various primary lines of business. A.M. Best expects operating results to be profitable and risk-based capitalization to remain fully supportive of the company's business plan.

Due to the strong reinsurance arrangement with Transatlantic, FAIRCO could receive positive rating enhancementif Transatlantic's ratings are upgraded. Conversely, FAIRCO could experience negative rating actions if Transatlantic's ratings are downgraded.

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. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "Catastrophe Analysis in A.M. Best Ratings"; "Understanding Universal BCAR"; and "Rating Members of Insurance Groups" Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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