A.M. Best Assigns Debt Ratings to Harleysville's Senior Notes.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--July 9, 2003 A.M. Best Co. has assigned an "a-" senior debt rating to Harleysville Group Inc.'s (HGIC HGIC Harleysville Group Inc ) (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 : HGIC) $100 million of 5.75% 10-year senior unsecured notes due July 2013. In addition, the current "a-" debt rating on existing senior notes has been affirmed. The financial strength ratings of A (Excellent) of the property/casualty pooling members of Harleysville Insurance and the financial strength rating of A- (Excellent) of Harleysville Life Insurance Company are unaffected. The rating outlook for Harleysville Insurance is positive. The rating outlook for the remainder of the ratings is stable. All companies are located in Harleysville, PA. The notes are being issued under HGIC's $200 million universal shelf registration to which A.M. Best has assigned indicative ratings of "a-" senior debt, "bbb+" subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". , "bbb" trust preferred securities and "bbb" preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. to HGIC's $200 million universal shelf registration. The proceeds from the senior debt issue may be used for general corporate purposes, including the payment of outstanding debt, acquisition activities and capital contributions to insurance operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. to support initiatives. HGIC, which is approximately 56% owned by Harleysville Mutual Insurance Company, maintains modest financial leverage, after the transaction with debt to capital of approximately 20% and excellent fixed-charge coverage fixed-charge coverage The number of times that a firm's operating income exceeds its fixed payments. Fixed-charge coverage is a measure of a firm's ability to meet contractually fixed payments, with high coverage indicating significant flexibility for making of about seven times. These ratings reflect HGIC's excellent capitalization, generally solid earnings and strong regional market franchise. These attributes are derived from HGIC's conservative balance sheet, sound underwriting fundamentals and well-established agency relationships. Under a regional insurer approach, HGIC benefits from its strong name recognition, extensive local market knowledge and stable market presence. HGIC ranks among the top 50 property/casualty insurance organizations in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Somewhat offsetting these positive rating factors are HGIC's unrewarding personal lines results and ongoing susceptibility to catastrophes and weather-related losses, which may lead to earnings variability earnings variability Fluctuations in a corporation's net income or earnings per share during a given period. Past earnings variability is generally considered undesirable because it makes investors less certain of future earnings per share and dividends. . Personal lines results in recent years have been negatively impacted by weather-related losses and rising loss costs. Additionally, total returns have been dampened by investment losses. However, HGIC has implemented corrective actions A corrective action is a change implemented to address a weakness identified in a management system. Normally corrective actions are instigated in response to a customer complaint, abnormal levels if internal nonconformity, nonconformities identified during an internal audit or to improve earnings that include re-underwriting, pricing adjustments, agency management actions and discontinuing business in unprofitable states. The following debt rating has been assigned: Harleysville Group Inc.-- -- "a-" rating on $100 million 5.75% 10-year senior unsecured notes, due July 2013 The following indicative ratings have been assigned to Harleysville Group Inc.'s $200 million universal shelf registration: Harleysville Group Inc.-- -- "a-" senior debt -- "bbb+" subordinated debt -- Harleysville Group Capital Trust I and II -- "bbb" preferred securities -- "bbb" preferred stock 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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