A.M. Best Affirms Financial Strength and Debt Ratings of Presidential Life Insurance Company.OLDWICK, N.J. -- 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). Concurrently, A.M. Best has affirmed the debt rating of "bb-" of $100 million 7.875% senior notes, due 2009 for Presidential Life Corporation (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) (both of Nyack, NY), the parent company of Presidential. The outlook for both ratings remains stable. The ratings reflect Presidental's improving profitability, its relatively high historical persistency, loyal agency force and diversified diversified (di·verˑ·s geographic premium distribution. Offsetting these positive factors are Presidential's modest 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. ; highly concentrated operational focus in the interest sensitive individual annuity market; and high exposure to risky securities, including 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. Over the last two years, Presidential has moderated its rapid growth rate to reduce capital 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. . This improvement is a result of management's efforts to improve operations and reduce capital volatility by lowering crediting rates, while gradually moderating the risk and volatility in its investment portfolio and discontinuing unprofitable product lines. Nonetheless, Presidential's investment portfolio still 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 Presidential's modest risk-adjusted capital. 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 its investment portfolio. While recognizing the historically good persistency of its inforce block, the company remains exposed to disintermediation The elimination of the distributor and/or retailer (the middleman) when making a purchase. The term is used to refer to purchasing directly from a manufacturer's Web site, the benefits of which are convenience, fast turnaround time and sometimes lower prices. risk as interest rates continue to rise. The ratings continue to recognize Presidential's good cost controls and operating profitability, strong distribution relationships and geographic concentration and customer service. As a result of recent improvement in capitalization, Presidential Life Corporation's financial leverage--defined as total debt to capital--has improved to about 21% at September 30, 2004. However, Presidential may face increased liquidity risk when factoring in shareholder dividends and funding requirements for supporting the necessary surplus levels if more aggressive growth plans resume. For Best's Debt Ratings, all other Best's Ratings Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. , an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings. 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 http://www.ambest.com. |
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