A.M. Best Downgrades Ratings of American Growers and Acceptance Insurance Company.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Nov. 20, 2002 A.M. Best Co. has downgraded the financial strength ratings of Acceptance Insurance Companies Inc.'s (NYSE NYSE See: New York Stock Exchange :AIF AIF Annual Information Form AIF Apoptosis-Inducing Factor AIF Agence Intergouvernementale de la Francophonie (French: Intergovernmental Agency for Francophony) AIF Australian Imperial Force ) two 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. , American Growers Insurance Company (Lincoln, NE) and its sister affiliate, Acceptance Insurance Company (Lincoln, NE). The rating of American Growers Insurance Company has been downgraded to C- (Weak) from B++ (Very Good), and the rating of Acceptance Insurance Company has been downgraded to C- (Weak) from B+ (Very Good). These rating actions follow Acceptance's announcement on November 18, 2002, which cited significant underwriting and operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. sustained in the third quarter of 2002, the resulting erosion in statutory surplus and the constrained financial flexibility of its publicly-traded parent company, Acceptance Insurance Companies Inc. This action is based on higher than expected crop losses caused by extensive drought conditions "Drought Conditions" is episode 126 of The West Wing. Plot Senator Rafferty, a new presidential candidate garnered much media attention with a ground-breaking speech about health care. throughout much of American Growers' operating territories, compounded by the write-down of deferred tax assets at the parent company, certain cash flow strain and the significant erosion in AIF's GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). equity. Given higher than anticipated losses in the 2002 crop year, the group is also subject to minimal, if any, expense relief in the form of profit sharing profit sharing, arrangement by which employees receive, in addition to their wages, a share of the net profits of a business. The purpose is to give them an incentive to increase their output through enhanced morale, less wasteful use of materials, better care of payments from the Federal Crop Insurance Corporation (FCIC FCIC Federal Citizen Information Center (formerly Federal Consumer Information Center; Pueblo, CO, USA) FCIC Federal Crop Insurance Corporation FCIC Federal Consumer Information Center ). As a consequence, American Growers' capital position has been so severely impacted that the company's level of surplus and overall assessment of risk-adjusted capitalization is considered tenuous. The rating also considers the uncertainty regarding the potential sale of American Growers' crop business to Rain and Hail L.L.C. and Ace American Insurance Company and views the rating outlook as negative due to the tentative nature of the agreement and the adverse consequences to the company in the event the sale is not consummated. As for Acceptance Insurance Company, the rating action reflects the company's role within the group, its vulnerable risk-adjusted capitalization and the ongoing adverse loss reserve development reported during the second and third quarters of 2002. A.M. Best will continue to monitor the group's progress with regard to the sale of its crop business, its ability to meet policyholder obligations, as well as any further issues which may arise. Due to the considerable challenges which remain, negative rating outlooks have been assigned to both companies. 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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