A.M. Best Downgrades Ratings of Kingsway Financial Services Inc., Kingsway America Inc. and Several Operating Subsidiaries.OLDWICK, N.J. -- A.M. Best Co. has downgraded the issuer credit ratings (ICR (Intelligent Character Recognition or Image Character Recognition) The machine recognition of hand-printed characters as well as machine printing that is difficult to recognize. ) to "b" from "bb-" of Kingsway Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. Inc. (KFSI) (Mississauga, Ontario For the First Nation, see . Mississauga (pronounced: [ˌmɪsɪˈsɑgə] listen ) and Kingsway America Inc. (KAI) (Elk Grove Village Elk Grove Village, village (1990 pop. 33,429), Cook and Du Page counties, NE Ill., a suburb of Chicago; inc. 1956. With a population of c.100 at the time of its establishment on open farmland, the village has grown dramatically and steadily, largely because of its , IL). Concurrently A.M. Best has downgraded the financial strength rating (FSR (Free System Resource) In Windows 3.x, the amount of unused memory in various 64K blocks reserved for managing current applications. Every open window takes some space in this area. See Windows memory limitation. ) to C++ (Marginal) from B- (Fair) and the ICR to "b" from "bb-" of Kingsway 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. Corporation (KRC KRC - Kent Recursive Calculator. A lazy functional language developed by David Turner in 1981 based on SASL, with pattern matching and ZF expressions. ["Functional Programming and its Applications", David A. Turner, Cambridge U Press 1982]. See also continental drift. ) (Barbados). In addition, A.M. Best has downgraded the FSR to B- (Fair) from B+ (Good) and ICR to "bb-" from "bbb-" of Lincoln General Insurance Company (Lincoln General) (Pennsylvania) and the FSR to B- (Fair) from B (Fair) and the ICR to "bb-" from "bb+" of American Country Insurance Company (American Country) (Illinois). Additionally, A.M. Best has downgraded the FSR to B (Fair) from B+ (Good) and the ICR to "bb" from "bbb-" of Kingsway General Insurance Company (Kingsway General) (Ontario). These companies are subsidiaries of KFSI. The outlook for all ratings is negative, except for American Country's FSR, which has been revised to negative from stable. (See below for a detailed listing of the companies and ratings.) The downgrading downgrading A reduction in the quality rating of a security issue, generally a bond. A downgrading may occur for various reasons including a period of losses, or increased debt service required by restructuring a firm's capital to include more debt and less of KFSI's rating is a direct reflection of the reduced financial strength of the underlying insurance companies, poor operating performance and diminished financial flexibility. The overall financial strength of the insurance companies has been weakened primarily by a sizeable loss of surplus since March 2008, which is attributable to reduced earnings and dividends to fund KFSI's payback Payback The length of time it takes to recover the initial cost of a project, without regard to the time value of money. of its bank debt, shareholders' dividends and normal course issuer bid. Additionally, in A.M. Best's opinion, KFSI's financial flexibility has been reduced. KFSI's share price is trading well under book value, and the current credit crisis significantly hinders the company from raising capital through equity offerings or through debt at favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. terms. Although debt leverage has been reduced by the repayment of bank debt, the funds to pay the debt came from the operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon whose underlying strength is the basis for KFSI's rating. Capital-raising initiatives have included the sale of non-core assets; however, the gains from these sales have not materially benefited the overall financial strength of the organization. In addition, A.M. Best remains concerned about earnings potential given ongoing adverse reserve development, soft market conditions, strong competition, lower production, turmoil in the investment markets and execution risk for various initiatives to raise profitability by improving controls, eliminating or repricing Repricing To change the price of an asset. In derivatives, it sometimes refers to the exchange of options of with different strike prices. repricing unprofitable business and reducing expenses. The downgrading of KRC's ratings is due primarily to a significant drop in surplus over the last six months from dividends and lower earnings, which was partially offset by lower investment, premium and reserve risk. The rating actions on KRC have a negative effect upon the ratings of Lincoln General and American Country due to their material dependency and concentration of credit risk, which is only partially mitigated by collateral. Additionally, these companies continue to lose capital through negative earnings. Kingsway General's ratings were downgraded due to its weakened capitalization from negative earnings as a result of adverse reserve development on prior accident year claims and ongoing challenges in the volatile Ontario automobile market. The FSRs of B+ (Good) and ICRs of "bbb-" have been affirmed for the following subsidiaries of Kingsway Financial Services Inc.: * American Service Insurance Company, Inc. * JEVCO Insurance Company * Kingsway Reinsurance (Bermuda) Ltd. * Mendota Insurance Company * Mendakota Insurance Company * Southern United Fire Insurance Company * U.S. Security Insurance Company, Inc. * Universal Casualty Company The following debt ratings have been downgraded: Kingsway America Inc.-- -- to "b" from "bb-" on USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 125 million 7.5% senior unsecured notes, due 2014 -- to "b" from "bb-" on USD 74.1 million 7.12% senior unsecured notes, due 2015 Kingsway Financial Services Inc. (issued under Kingsway General Partnership)-- -- to "b" from "bb-" on CAD 100 million 6% senior unsecured debentures, due 2012 All senior debt is unconditionally guaranteed by KFSI and KAI. The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com. |
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