A.M. Best Affirms Financial Strength and Debt Ratings of Presidential Life Insurance Company.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 13, 2004 A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the financial strength rating of B+ (Very Good) of Presidential Life Insurance Company (Presidential) (Nyack, NY) (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : PLFE). Concurrently, A.M. Best has affirmed the senior debt rating of "bb-"of $100 million 7.875% senior notes for Presidential Life Corporation, the parent company of Presidential. The rating outlooks remain stable. The ratings reflect Presidental's recent return to profitability, its relatively high historical persistency, loyal agency force and well diversified geographic premium distribution. Offsetting these positive factors are its relatively weak risk-adjusted capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. ; high operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. ; concentrated operational focus in the interest sensitive individual annuity market and high exposure to risky securities; less than investment grade bonds; and relatively illiquid Illiquid An asset or security that cannot be converted into cash very quickly (or near prevailing market prices). Notes: A house is a good example of an illiquid asset. See also: Cash, Liquidity Illiquid In the context of finance. private placements and limited partnerships. Presidential has slowed down its rapid growth rate to prevent further strain from new business writings. Following a period of reported net losses and weak risk-adjusted capitalization, the company's financial operations have started to stabilize stabilize See peg. . The improvement is due to several factors, including lowering crediting rates, the recent turnaround in the equity markets, as well as management's decision to concurrently reduce risk and volatility in its investment portfolio. Presidential's investment portfolio includes a large exposure to asset-backed and structured securities, less than investment grade bonds and illiquid investments in private placements and limited partnerships. A.M. Best continues to view this with concern, given the company's substantial decline in absolute and risk-adjusted capital over the last several years. A.M. Best also recognizes the risk associated with Presidential's concentrated market profile, consisting primarily of fixed annuity Fixed Annuity An insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until the annuitant dies. The insurance company guarantees both earnings and principal. products and the uncertainty regarding the future performance of the company's investment portfolio. The ratings continue to recognize Presidential's favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. historical persistency achieved in the deferred annuity Deferred Annuity A type of annuity contract that delays payments of income, installments or a lump sum until the investor elects to receive them. This type of annuity has two main phases, the savings phase in which you invest money into the account, and the income phase in which marketplace, good cost controls and operating profitability, strong distribution relationships and improved geographic concentration and customer service. As a result of recent improvement in capitalization, Presidential Life Corporation's financial leverage--defined as total debt to equity-- has improved to about 31% at September 30, 2003, when compared to the comparable period last year. However, this is considerably higher than its debt leverage ratio in 2001 when the new debt was issued. Presidential may face increased liquidity risk when factoring in shareholder dividends and funding requirements for supporting the necessary surplus levels and its long-term growth plans. The following debt rating has been affirmed: Presidential Life Corporation-- -- "bb-" on $100 million 7.875% senior notes, due 2009 For a list of A.M. Best's debt ratings, please visit http://www.ambest.com/ratings/debtrating/companies.html. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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