The rating firm gave a financial strength rating of “A-minus” (excellent) and an issuer credit rating of “a-minus” to Twin Bridges Ltd. in Bermuda, and issuer credit rating of “bbb-minus” to Twin Bridges parent, CRM Holdings Ltd and CRM's downstream holding company, CRM USA Holdings Inc.

Concurrently, Best said it has assigned a debt rating of “bb” to the $35 million 8.65 percent junior subordinated debt securities, due 2036, of CRM USA Holdings Inc. The outlook on all ratings is stable, Best said.

The rating actions, Best said, reflect the completed acquisition of Majestic's parent, Embarcadero Insurance Holdings Inc. by CRM Holdings Ltd.

According to Best, the acquisition resulted in a stronger level of capitalization, increased financial flexibility and an enhanced market profile for Majestic, as well as the projected cost savings for Twin Bridges that will be achieved as a result of the combination.

This rating action also reflects the improved profitability and favorable reserve development experienced by Majestic over the last two years, Best said.

However, the rating firm found that offsetting these positive factors is the execution risk involved in joining the two organizations, as well as anticipated new premium growth for both Majestic and Twin Bridges.

Best also noted what it said was the relative immaturity of the reserves of the excess workers' compensation business in Twin Bridges, which could develop differently than expected. Additionally, the softening environment in the California workers' compensation market could pose a significant obstacle to the future profitability of the two operating companies, Best found.