A.M. Best Co. downgrades Vik Brothers Insurance Group.OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 22, 1997--Effective immediately, A.M. Best Co. has lowered its rating on Vik Brothers Insurance Group (VBIG VBIG Ventricular Bigeminy ), Lawrenceville, N.J., from "B+" (Very Good) to "B-" (Adequate) and placed it under review with negative implications. This action takes VBIG's rating from the Secure category into the Vulnerable category. The downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. is based on the deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. of VBIG's financial condition during 1996, which has led to the difficulty in closing the acquisition of VBIG by Highlands Insurance Group Inc. (HIGI Noun 1. Higi - a Chadic language spoken south of Lake Chad Kapsiki Biu-Mandara - a group of Chadic languages spoken in the border area between Cameroon and Nigeria south of Lake Chad ). After the June 1996 announcement that a definitive agreement had been signed for HIGI to acquire VBIG, A.M. Best had affirmed VBIG's "B+" rating. The affirmation was based on the signing of the agreement and the anticipated benefits of the transaction, including the reduction in dividend demands on VBIG, since its debt and 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. and servicing burdens would have been essentially transferred to HIGI. During the first nine months of 1996, VBIG's surplus declined 15% because of poor underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. performance, largely reflecting catastrophe losses. This material change in VBIG's financial condition has raised doubts as to whether the transaction will close. If the transaction is canceled, the group's "B-" rating will be under downward pressure as a result of VBIG's excessive financial leverage and poor profitability. The rating will remain under review pending the outcome of the transaction and the evaluation of VBIG's year-end financial condition and management's plans to reverse deteriorating underwriting trends. This rating action applies to the following members of Vik Brothers Insurance Group: American Professionals Insurance Co.; LMI LMI Labor Market Information LMI Local Management Interface LMI Logistics Management Institute LMI Linear Matrix Inequality LMI Legemiddelindustriforeningen (Norway) LMI Low to Moderate Income LMI Lender's Mortgage Insurance Insurance Co.; NN Insurance Co.; Northwestern National Casualty Co.; Northwestern National County Mutual Insurance Co.; Pacific Auto Insurance Co.; Pacific National Insurance Co.; State Capital Insurance Co.; Statesman Ins. Co. A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source. CONTACT: Jeffrey Dunsavage (908) 439-2200, ext. 5618 |
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