A.M. Best Assigns Rating to Protective's New Capital Securities.OLDWICK, N.J. -- A.M. Best Co. has assigned a rating of "bbb+" to $200 million of fixed rate junior subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before to be issued by Protective Life Corporation (Protective) (NYSE NYSE See: New York Stock Exchange : PL) (Birmingham, AL). The rating outlook is stable. 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). from this offering will be used as part of the funding plan to finance the Chase Insurance Group acquisition, which was announced in February and is expected to be completed in third quarter 2006. Protective's all-in pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma financial leverage--total debt-plus-preferred securities--will be slightly over 30%, approaching the upper end of the range for its current ratings. However, incorporating some equity credit for the group's existing and to-be-issued hybrid securities Hybrid Security A security that combines two or more different financial instruments. Notes: Hybrid securities generally combine both debt and equity characteristics. adjusts the debt-to-capital ratio to a more reasonable 20%. Additionally, A.M. Best believes Protective's future earnings--supplemented by the incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. earnings from the Chase Insurance block--will provide strong interest coverage and enable capitalization to remain rather constant. Pro forma cash coverage is expected to exceed four times. The tax-deductible securities have several features that garner equity credit such as a 60-year final maturity; the issuer's ability to defer interest up to five years with cumulative and compounding coupons; a trigger event; they are non-callable for five years; and they are subordinated to all existing debt within the enterprise. In addition, at the time of repayment or redemption, Protective intends to replace the capital securities with securities of equal or greater equity characteristics. As such, A.M. Best has granted them 75% equity credit in Protective's financial leverage calculation. The rating assignment also reflects the securities' liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy preference as being subordinated to the group's outstanding trust preferred securities but senior to 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. (of which there is currently none outstanding). A.M. Best notes that if a trigger event occurs and continues for more than one year, the capital securities contain an alternative coupon satisfaction mechanism that requires the company to issue common stock. Protective's ratings reflect its strong, sustainable earnings, diversified revenue and profit sources, broad distribution capabilities, solid risk-adjusted capitalization and superior investment performance. The ratings also acknowledge Protective's success in deploying excess capital via acquisition and effective integration of insurance companies and blocks of business. A.M. Best expects the impact of adding the Chase Insurance business will be consistent with Protective's historical acquisition track record--generating strong statutory capital over time by leveraging scale and its low cost structure. 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 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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