A.M. Best Comments on Pending Affiliation Agreement between Penn National Insurance and Partners Mutual Insurance Company

A.M. Best Co. has commented that the financial strength rating (FSR) of A- (Excellent) and the issuer credit ratings (ICR) of "a-" of Penn National Insurance (Penn National) and its members, Pennsylvania National Mutual Casualty Insurance Company (Penn Mutual), Penn National Security Insurance Company (all three domiciled in Harrisburg, PA) and Founders Insurance Company (Lawrenceville, NJ) remain unchanged following the recent announcement that Penn National has entered into an affiliation agreement with Partners Mutual Insurance Company (Partners)(Waukesha, WI).

Subsequently, Penn National and Partners Mutual will enter into an intercompany reinsurance pooling agreement, which will provide both companies with increased diversification through additional spread of risk, more closely aligning the results of the consolidated operation, while providing Penn National access to Wisconsin and Iowa through Partners independent agency base. The affiliation agreement was approved by the respective boards of directors of each company and is subject to regulatory approval, which is expected prior to year-end 2011.

On August 12, 2011, A.M. Best affirmed the FSR and ICR of Penn National and its members, as well as the debt rating of "bbb" on $50 million 9.5% 30-year subordinated debenture, due 2034 issued by Penn Mutual. The outlook for all ratings is stable.

The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Property/Casualty Insurers"; "A.M. Best's Ratings & The Treatment of Debt"; "Equity Credit for Hybrid Securities"; and "Natural Catastrophe Stress Test Methodology." Methodologies 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 © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

Contacts:

A.M. Best Company, Inc.
Gordon McLean, 908-439-2200, ext. 5304
Senior Financial Analyst
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Gerard Altonji, 908-439-2200, ext. 5626
Assistant Vice President
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or
Carole Lovell, 908-439-2200, ext. 5445
Public Relations Associate
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or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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