A.M. Best Affirms ReliaStar Life at A+ On News of Parent's Plan to Acquire Pilgrim Capital.OLDWICK, N.J.--(BUSINESS WIRE)--July 23, 1999-- A.M. Best Co. today 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 A+ (Superior) rating of ReliaStar Life Insurance Co., Minneapolis Minneapolis (mĭn'ēăp`əlĭs), city (1990 pop. 368,383), seat of Hennepin co., E Minn., at the head of navigation on the Mississippi River, at St. Anthony Falls; inc. 1856. . The action followed yesterday's announcement by ReliaStar Financial Corp., the parent of ReliaStar Life, that it had entered a definitive agreement to acquire Pilgrim Capital Corp., a Phoenix-based asset-management and mutual fund company, for approximately $258 million. Under the agreement, Pilgrim shareholders will receive 0.5 shares of ReliaStar common stock and a cash payment of $12.50 for each Pilgrim share, subject to a final exchange ratio and cash component to be determined at the time of closing. A.M. Best views the acquisition positively, as it gives the company a more extensive array of mutual fund offerings and brings needed scale to ReliaStar's money-management operations, which are vital to remaining competitive in the current environment. In addition to lowering unit costs through the combination of money management, administrative and marketing functions, the acquisition also provides complementary distribution capacity and cross-selling opportunities--areas that ReliaStar has successfully leveraged in the past. A.M. Best also expects that, through ReliaStar's integrated operating and distribution strategies, the company will benefit from an enhanced competitive position in its individual life and retirement savings insurance products. ReliaStar has generated substantial revenues and earnings from its mix of risk, spread and fee-based businesses. The growth of the less capital-intensive Capital-intensive Used to describe industries that require large investments in capital assets to produce their goods, such as the automobile industry. These firms require large profit margins and/or low costs of borrowing to survive. fee-based business with the acquisition of Pilgrim improves ReliaStar's capital utilization. ReliaStar's recent program to integrate operations and promote cross-selling across business units has improved distribution productivity and reduced administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. across substantially all subsidiaries. ReliaStar has also centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. manufacture, administration and servicing of each major product line to leverage core competencies A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahalad (1990):
While the acquisition is expected to modestly increase financial leverage and reduce ReliaStar's fixed coverage ratio, A.M. Best notes that the company will continue to maintain a leverage position and coverage ratio that is well within the expectations for its current rating. The acquisition also improves the diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. of earnings within ReliaStar Financial, as fee-based profits generated outside the insurance entities will rise to approximately 10% of total corporate earnings. The ratings of ReliaStar Life of New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (formerly ReliaStar Bankers Security Life), Woodbury, N.Y.; ReliaStar Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Group (UK) Ltd., London; and Northern Life, Seattle Wash. also were affirmed at A+ (Superior). Security-Connecticut Life Insurance Co., Avon, Conn., was affirmed at A. A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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