A.M. Best Downgrades Rating of TIG; Affirms Rating of Crum and Forster; Affirms Ratings of Fairfax and its Subsidiaries.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Nov. 30, 2001 A.M. Best Co. has downgraded the financial strength rating of TIG n. 1. A game among children. See Tag. 2. A capacious, flat-bottomed drinking cup, generally with four handles, formerly used for passing around the table at convivial entertainment. Insurance Group, Irving, Texas Irving (pronounced 'er-ving') is a city located in the U.S. state of Texas within Dallas County. According to the 2000 U.S. Census, the city population was 191,615; the 2006 estimate was 201,927 according to the North Central Texas Council of Governments, and 196,084 according to , from A- (Excellent) to B++ (Very Good), affirmed the A- (Excellent) financial strength rating of Crum and Forster Insurance Group (CFI CFI abbr. cost, freight, and insurance ), Morristown, New Jersey Morristown is a town in Morris County, New Jersey, United States. As of the United States 2000 Census, the town population was 18,544. Its estimated population in 2004 was 18,842. It is the county seat of Morris CountyGR6. , and has removed both ratings from under review. Concurrent with these rating actions, A.M. Best also affirmed the financial strength ratings relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc other insurance subsidiaries of Fairfax Financial Holdings Fairfax Financial Holdings Limited TSX: FFH.SV NYSE: FFH is a Toronto, Ontario based financial services holding company which, through its subsidiaries, is engaged in property, casualty and life insurance and reinsurance, investment management and insurance claims (FFH FFH Far From Home (band) FFH Fast Frequency Hopping FFH Frigate Helicopter FFH Final Fantasy High (gaming) FFH Fauji Foundation Hospital (Pakistan) FFH Falling for Her ), Toronto, as delineated de·lin·e·ate tr.v. de·lin·e·at·ed, de·lin·e·at·ing, de·lin·e·ates 1. To draw or trace the outline of; sketch out. 2. To represent pictorially; depict. 3. below. The "bbb-" senior debt rating relating to FFH, the "bb+" senior debt and "bb" trust preferred ratings relating to TIG Holdings have also been affirmed. These various rating actions are consequences of FFH's previously announced third quarter loss of C$458 million, which included a substantial charge relating to reserve strengthening at its two largest U.S. insurance subsidiaries, CFI and TIG. On November 6, 2001, following FFH's earnings release, A.M. Best placed the financial strength ratings of these companies under review with developing implications. The current rating actions are based on A.M Best's recently completed review of the holding company and FFH's various insurance subsidiaries. A.M. Best's review focused on the adequacy of current carried reserves at CFI and TIG, capitalization, prospective earnings capabilities for the consolidated group and the financial flexibility at the holding company. FFH's unsatisfactory earnings performance over the last several years has been largely attributable to 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 at CFI and TIG through the transition period that followed their acquisition by FFH. These companies were acquired at the height of a soft commercial insurance market in 1998. As such, each company has been negatively impacted by underwriting losses emerging from business written under the oversight of prior ownership. While each company strengthened its respective reserve position following FFH's acquisition, earlier reserving actions did not contemplate deficiencies in claims practices that have since been corrected, nor the extent of under-pricing in the existing inforce book of business at the time of acquisition. The recent reserving actions are based on improved data quality following a comprehensive restructuring at both CFI and TIG. These actions, combined with prudent 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. protections, sound capitalization and improved risk selection and pricing across all insurance subsidiaries should provide material improvement in FFH's operating performance in 2002. Further, throughout the transition period, FFH has and will continue to maintain a conservative liquidity position at the holding company to compensate for any residual weakness in earnings at CFI or TIG. Holding company cash and short-term securities are expected to approximate C$800 million by December 2001, supported by realized capital gains and a recent C$250 million equity offering. This favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. cash cushion, combined with available dividends from profitable international insurance subsidiaries and a favorable debt maturity schedule, provide for an adequate level of cash coverage relating to debt service. Further, the need to access dividends from under-performing insurance subsidiaries to service holding company debt is alleviated during their transition period to profitability. It is A.M Best's expectation that FFH will maintain financial leverage at or below current levels and cash coverage of at least four times over the mid-term. 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. of TIG's A- (Excellent) rating to B++ (Very Good) reflects A.M. Best's belief that despite significant remedial actions A remedial action is a change made to a nonconforming product or service to address the deficiency. Rework and repair are generally the remedial actions taken on products, while services usually require additional services to be performed to ensure satisfaction. already taken by the current management, TIG's turnaround will be protracted pro·tract tr.v. pro·tract·ed, pro·tract·ing, pro·tracts 1. To draw out or lengthen in time; prolong: disputants who needlessly protracted the negotiations. 2. due to its operating platform, which limits flexibility in pricing and underwriting control. TIG maintains a significant concentration of business with a limited number of managing general agents. In addition, the company's historical dependence on third party administrators heightens the uncertainty with respect to the adequacy of its reserve position. However, the current rating continues to reflect TIG's adequate level of capitalization even with consideration to the continued significance of affiliated invested assets. In addition, A.M. Best believes that the company will benefit from improving market conditions within the commercial insurance sector. The affirmation of CFI's A- (Excellent) rating is reflective of A.M. Best's belief that as a result of the current management's underwriting and reserving actions, CFI's operating performance will significantly improve in 2002. This improvement has already begun to emerge in both accident and policy year underwriting trends. This, combined with CFI's strengthened reserves, solid capitalization and significant reinsurance protection relating to prior accident years, positions the company to take advantage of the favorable turn in the commercial insurance sector. Concurrently, the A- (Excellent) rating on Compagnie Transcontinentale de Reassurance's (CTR See click-through rate. ), Paris, has been downgraded to B++, reflecting a change in its status to a non-strategic affiliate of Odyssey Odyssey (ŏd`ĭsē): see Homer. Odyssey Homer’s long, narrative poem centered on Odysseus. [Gk. Lit.: Odyssey] See : Epic Odyssey Reinsurance Group. Also the A- (Excellent) rating on Commonwealth Insurance Company and its direct subsidiary, Commonwealth Insurance Company of America has been placed under review with developing implications pending the termination of its inter-company reinsurance arrangement with TIG Insurance Company. The sustainability of the ratings for FFH and each of its insurance subsidiaries is contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent the overall success of the group to execute its business strategy in accordance with its own and A.M. Best's expectations.
The individual ratings affected are as follows:
Company Rating Action
FFH, senior unsecured debt bbb- Affirmed
TIG Holdings, senior unsecured debt bb+ Affirmed
TIG, trust preferred bb Affirmed
TIG Insurance Group B++ Downgrade from A-
Crum & Forster Insurance Group A- Affirmed
Ranger Insurance Group B++ Affirmed
Odyssey Reinsurance Group A Affirmed
International Insurance Company B++ Affirmed
Seneca Insurance Group A- Affirmed
Lombard General Insurance Company
of Canada A- Affirmed
Markel Insurance Company of Canada A- Affirmed
Federated Insurance Company of Canada A- Affirmed
Federated Life Insurance Company
of Canada B++ Affirmed
Commonwealth Insurance Company A- Under Review
CTR B++ Downgrade from A-
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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