Surety INTERNATIONAL FIDELITY INSURANCE COMPANY Newark, New Jersey A- Ultimate Parent: IFIC Surety Group, Inc. INTERNATIONAL FIDELITY INSURANCE COMPANY One Newark Center, 20th Floor Newark, NJ 07102-5207 Web: www.ific.com Tel: 973-624-7200 AMB#: 000520 NAIC#: 11592 Ultimate Parent#: 046484 FEIN#: 22-1010450 BEST S CREDIT RATING Best s Financial Strength Rating: A- Best s Financial Size Category: VII Outlook: Stable RATING RATIONALE The following text is derived from A.M. Best s Credit Report on IFIC Group (AMB# 018771). Rating Rationale: The ratings are based on the consolidated operating performance and financial condition of International Fidelity Insurance Company (IFIC) and its wholly owned subsidiary, Allegheny Casualty Company (ACC), collectively, IFIC Group or the group. The ratings are reflective of IFIC Group s strong balance sheet, solid underwriting and overall operating results as well as the group s expertise in its contract, commercial, subdivision, bail and non-standard surety lines of business. The ratings are supported by the longevity of the group s business model through commitment and service devoted to its niche market. Partially offsetting rating factors include the group s limited business scope with writings reserved to surety- and fidelity-related business as well as competitive market conditions within the commercial and contract surety business. Further, the IFIC Group s underwriting expense ratio and investment earnings continue to fall short of its peer composite. As such, the group operates under tight margins. Of further concern are volatile total return measures over the most recent five-year period, driven by realized and unrealized investment losses. Printed April 24, 2017 www.ambest.com Page 1 of 5
The outlooks reflect A.M. Best s opinion that management has taken significant and beneficial actions towards implementing effective internal controls as part of an overall effort to develop a comprehensive enterprise risk management (ERM) framework. The outlooks were revised to negative in 2014 following discovery by the group s management of material weaknesses in its internal controls, which ultimately had an adverse impact on capitalization and operating performance. There is an ongoing effort to implement a series of changes to the group s ERM structure and return measures. Updated practices include both revised governance policies as well as efforts to improve investment yields. Revisions to the group s ERM began in mid-2014, and the benefits and effectiveness of those programs are expected to continue. Negative rating action could occur if risk-adjusted capitalization materially weakens. Negative rating action could occur if operating performance were to trend unfavorably. Negative rating action could occur if the group s ERM practices are not effective, exhibited by operational failures. KEY FINANCIAL INDICATORS ($000) Net Pre-tax Total Policy- Premiums Operating Admitted holders Comb. Year Written Income Assets Surplus Ratio 2012 110,025 9,472 246,825 103,823 90.5 2013 113,228 19,539 235,092 84,274 86.2 2014 107,556-548 210,142 83,907 100.0 2015 101,362 2,662 203,095 83,877 97.8 2016 98,546 7,145 214,416 89,109 91.6 (*) Data reflected within all tables of this report has been compiled from the company-filed statutory statement. BUSINESS PROFILE The following text is derived from A.M. Best s Credit Report on IFIC Group (AMB# 018771). IFIC Group provides a wide range of surety bonds, including contract payment and performance bonds, license and permit bonds, and other miscellaneous type bonds. IFIC Group (IFIC or the group) is also among the largest bail bond carriers in the United States. The group writes fidelity bonds in several states, which are offered as an- cillary coverages to the commercial business written in those states. The companies within the group are listed by the United States Treasury Department and are authorized to write surety bonds in all federal courts. Surety bonds are produced through independent agents and brokers. Bail bonds are produced through various agencies licensed in territories throughout the United States and appointed directly by the company. The bail premium is processed by an affiliate and underwritten by officers of IFIC s managing general agent. Commercial surety or miscellaneous bonds consist of transactional license and permit bonds below $100,000, court, judicial, customs and miscellaneous indemnity type bonds. The company discontinued the writing of customs bonds through an MGA during 2008, and now writes customs bonds on its own. In 2009, IFIC established a specialty underwriting department to write bonds for contractors who may not be qualified for a surety bond on an unsecured basis but can become qualified with some level of security being provided. This non-standard surety business is written through a network of regional profit centers in which the employees are dedicated solely to this specialty line. ACC was acquired to support this specialty department s separate identity, rates and commissions. While bonds written by the specialty underwriting department are issued by ACC, all of the risk is assumed by IFIG by way of an internal 100% reinsurance agreement between ACC and IFIC, effective January 1, 2010. ACC also writes (and retains) bail bond business. The Collateral funds are collected and held by ACC and the losses incurred on the specialty business are ceded to IFIC net of Collateral recoveries, per the IFIC and ACC reinsurance agreement. Territory: The company is licensed in the District of Columbia, Guam, Puerto Rico, U.S. Virgin Islands and all states. 2016 BY-LINE BUSINESS ($000) Reinsurance DPW Prem Assumed Product Line ($000) (%) ($000) (%) Surety.......................... 111,055 99.9 11,556 100.0 All Other....................... 137 0.1 Total........................... 111,192 100.0 11,556 100.0 Printed April 24, 2017 www.ambest.com Page 2 of 5
Reinsurance Business Prem Ceded NPW Retention Product Line ($000) (%) ($000) (%) (%) Surety...................... 24,192 100.0 98,420 99.9 80.3 All Other................... 11 0.0 126 0.1 92.3 Total....................... 24,203 100.0 98,546 100.0 80.3 HISTORY This company was incorporated December 27, 1904, under the laws of New Jersey and began business January 5, 1905. The Monmouth Insurance Company, Newark, NJ, incorporated and licensed under the laws of New Jersey in August 1963, was merged with and into International Fidelity Insurance Company (IFIC) during the early part of 1964. Stockholders of the absorbed company surrendered their stock certificates for a like number of shares in IFIC. On March 1, 1993, paid-in capital was changed to $1,500,000, consisting of 1,000,000 authorized, issued and outstanding common shares at $1.50 par value each. On December 3, 1991, the company redeemed and retired 12,000 authorized and outstanding preferred non-voting shares at $100 per share. At December 31, 2015 the company held 40,558 shares of treasury stock at a cost of $45 per share. Effective December 16, 2003, the company issued floating rate surplus notes in the amount of $6,000,000 with an interest rate of LIBOR plus 4.1% to InCapS Funding II, Ltd., in exchange for cash. The notes mature January 8, 2034. Effective December 16, 2005, the company issued floating rate surplus notes in the amount of $10,000,000 with an interest rate of LIBOR plus 3.45% to Alesco Preferred Funding IX, Ltd., in exchange for cash. The notes mature December 15, 2035. Any payment of interest or repayment of principal is subject to approval by the New Jersey Department of Banking and Insurance. Officers: Chairman of the Board and President, Francis L. Mitterhoff; Chief Executive Officer, Robert W. Minster; Executive Vice Presidents and Chief Underwriting Officers, George R. James, Adrian Oddi; Executive Vice President and Secretary, Norman R. Konvitz; Executive Vice President and Treasurer, Ellen S. Kagan; Executive Vice President and Chief Human Resource Officer, Beatriz I. Sampedro; Senior Vice President and Chief Information Officer, George O. Rankin; Senior Vice Presidents and Chief Risk Officers, Bruce Monahan, Anthony J. DeMartino, Jr. (Underwriting); Senior Vice President and Chief Accounting Officer, Maria D. Costa; Senior Vice President and Chief Legal Officer, Frank J. Tanzola, Jr.; Senior Vice Presidents, Dale Braue, Gary Leuck; Vice President and Chief Claim Officer, Kyle Murphy; Vice President and Controller, Scott Bowen; Vice Presidents, Anna Dime, Craig Golden, Robert B. Marshall, Daniel J. Mitterhoff, Brian N. Nairin, Dorothy O Conner-Manson, J. Marsh Pennington, Brian St. Clair, Michael Tully. Directors: Jeffrey D. Butler, Ellen S. Kagan, Norman R. Konvitz, Robert W. Minster, Francis L. Mitterhoff, Martin P. Sheffield, Harvey C. Sigelbaum. MANAGEMENT Majority ownership (67.90%) of the company resides with eight parties: AIA Holdings, Inc. (5.49%), Konvitz Family 2004 Trust (7.27%), Judith Altman (10.04%), Charlotte Mitterhoff (11.15%), The Charlotte & Francis L. Mitterhoff Family Trust (9.11%), Norman R. & Nina Konvitz (10.56%), Jayne Konvitz Kobrin (7.40%) and Barbara Konvitz-Dubel (6.88%). The affairs of the company are directed by Francis L. Mitterhoff, chairman of the board and president. He has been associated with the company since 1964. Printed April 24, 2017 www.ambest.com Page 3 of 5
Balance Sheet Admitted Assets ($000) YE 2016 % Bonds................................ $116,553 54.4 Common stock......................... 8,565 4.0 Cash and short-term invest............... 27,210 12.7 Other non-affil inv asset.................. 17,364 8.1 Investments in affiliates.................. 26,462 12.3 Total invested assets.................. $196,155 91.5 Premium balances...................... 9,399 4.4 Accrued interest........................ 644 0.3 All other assets......................... 8,218 3.8 Total assets.......................... $214,416 100.0 Liabilities & Surplus ($000) Loss & LAE reserves..................... $ 6,267 2.9 Unearned premiums..................... 34,001 15.9 Conditional reserve funds................ 44 0.0 All other liabilities....................... 84,995 39.6 Total liabilities........................ $125,307 58.4 Surplus notes.......................... 16,000 7.5 Capital & assigned surplus................ 896 0.4 Unassigned surplus..................... 72,213 33.7 Total policyholders surplus............. $ 89,109 41.6 Total liabilities & surplus................ $214,416 100.0 Printed April 24, 2017 www.ambest.com Page 4 of 5
Why is this Best s Rating Report important to you? The A.M. Best Company is the oldest, most experienced rating agency in the world and has been reporting on the financial condition of insurance companies since 1899. policy, contract or any other financial obligation issued by an insurer, nor does it address the suitability of any particular policy or contract for a specific purpose or purchaser. A Best s Financial Strength Rating (FSR) is an independent opinion of an insurer s financial strength and ability to meet its ongoing insurance policy and contract obligations. An FSR is not assigned to specific insurance policies or contracts and does not address any other risk, including, but not limited to, an insurer s claims-payment policies or procedures; the ability of the insurer to dispute or deny claims payment on grounds of misrepresentation or fraud; or any specific liability contractually borne by the policy or contract holder. An FSR is not a recommendation to purchase, hold or terminate any insurance The company information appearing in this pamphlet is an extract from the complete AMB Credit Report. You may obtain the complete report by contacting Customer Service at +1(908)439-2200 or customer_service@ambest.com. Please reference the company s identification number (AMB#) listed on this rating report. For the latest Best s Financial Strength Ratings along with their definitions and A.M. Best s Terms of Use, please visit www.ambest.com. Copyright 2017 A.M. Best Company, Inc. and/or its affiliates. All rights reserved. No part of this report may be reproduced, distributed, or stored in a database or retrieval system, or transmitted in any form or by any means without the prior written permission of the A.M. Best Company. While the data in this report was obtained from sources believed to be reliable, its accuracy is not guaranteed. Printed April 24, 2017 www.ambest.com Page 5 of 5