A.M. Best Assigns Debt Ratings to Selective's New Junior Subordinated Notes and Indicative Debt Ratings to Its New Shelf Registration.OLDWICK, N.J. -- A.M. Best Co. has assigned a debt rating of "bbb" to the forthcoming $100 million 7.5% junior subordinated notes due 2066 to be issued by Selective Insurance Group, Inc. (Selective) (Branchville, NJ) (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 : SIGI). Concurrently, 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". 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 the company's new universal shelf registration filed late last week. The existing debt and financial strength ratings of Selective and its subsidiaries are unchanged. All ratings have a stable outlook. Selective plans to use the net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of the $100 million junior subordinated notes issuance for general corporate purposes, including meeting debt obligations and shareholder dividend requirements. The company does not intend to use the proceeds to accelerate its current share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program and, as a result, A.M. Best believes cash and short-term investments at the holding company will increase comfortably above its projected 2007 fixed cash obligations, including shareholder dividends. The ratings reflect Selective's solid capitalization, historically favorable operating performance, strong regional market presence and contained catastrophe exposure. In addition, the ratings recognize Selective's disciplined underwriting culture, diversified product offerings and the leveraging of its agency relationships, which have contributed to the group's consistent operating profitability. Selective's debt-to-total capital at June 30, 2006 (excluding accumulated other comprehensive income In 1997 the Financial Accounting Standards Board issued a Statement on Financial Accounting Standards entitled “Comprehensive Income”. This statement required all income statement items to be reported either as a regular item in the income statement and or a special item as ) was 22.0%, down from 28.2% at year-end 2005 and 26.6% at year-end 2004 (the company has an objective of keeping its financial leverage at or below 25%). With the issuance of the $100 million of junior subordinated notes, the company's proforma debt-to-total capital at June 30, 2006 increases to 28.0%. However, A.M. Best considers the junior subordinated notes to be hybrids, partly reflecting their equity-likeness stemming from their 60-year maturity. Providing equity credit for these hybrid notes and adjusting for funds held in escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. for the repayment of debt, the company's adjusted, proforma debt-to-total capital at June 30, 2006 was approximately 22%. Based on a review of Selective's sources and uses of holding company funds and an expectation of continued profitable, albeit modestly lower, operating performance, A.M. Best is optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op Selective will be able to maintain relatively stable financial leverage measures in 2006. For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit 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 www.ambest.com. |
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