A.M. Best Downgrades Ratings of the Unitrin Property and Casualty Insurance Group; Assigns Debt Ratings.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Nov. 21, 2002 A.M. Best Co. has downgraded the financial strength ratings to A (Excellent) from A+ (Superior) of Unitrin Property and Casualty Insurance Group (Unitrin) (Dallas) and removed them from under review. A.M. Best has also affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the financial strength ratings of A (Excellent) for three life/health insurance companies and A- (Excellent) for two life/health insurance companies. Additionally, A.M. Best has assigned an "a-" senior debt rating to Unitrin Corp.'s existing debt securities and the following indicative ratings to the remaining $200 million under the company's $500 million shelf registration: senior debt "a-"; subordinate debt See Junior debt. "bbb+" 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. "bbb." The rating outlooks are stable. (Please see listing of companies below.) 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 the ratings reflect Unitrin's unfavorable operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before over recent years and decline in capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. . Operating returns reflect rising 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. losses across the group's core business segments, which are attributable to inadequate premium rates, increasing loss cost trends, weather-related losses, elevated expenses and adverse loss reserve development. Further, Unitrin faces execution risk that reflects the renewal rights acquisition of Kemper Insurance Companies' personal lines business, which will add significant net written premium to the group's operations. However, this risk will be limited since Kemper's business will operate as a separate business segment and the operational infrastructure was acquired in the transaction. Although capital has been re-allocated from the life/health subsidiaries to support the Kemper acquisition and to offset 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. , capitalization is no longer supportive of a Superior rating. (For more information about the Kemper acquisition refer to A.M. Best's news release on Unitrin dated April 15, 2002.) Nevertheless, the Excellent ratings reflect Unitrin's solid capitalization and balanced book of business among personal and commercial lines. These positive rating factors are derived from a diversified diversified (di·verˑ·s product offering, strong regional market presence, long-standing independent agency relationships and prudent catastrophe exposure management. The ratings also acknowledge the group's actions to improve profitability, which have included implementing rate increases, geographically diversifying business and re-underwriting select books of business. The ratings assigned to the life/health subsidiaries of Unitrin Inc. reflect their consistently profitable operating performance, adequate level of risk-adjusted capitalization and continuing premium growth. Partially offsetting these strengths is a significant reduction in the absolute capital and surplus funds Surplus funds Cash flow available after payment of taxes in a project. due to stockholder dividends to reallocate Verb 1. reallocate - allocate, distribute, or apportion anew; "Congressional seats are reapportioned on the basis of census data" reapportion allocate, apportion - distribute according to a plan or set apart for a special purpose; "I am allocating a loaf of capital in order to support the property/ casualty operations. The debt ratings reflect the attributes of the insurance subsidiaries and Unitrin's financial flexibility that is characterized by moderate financial leverage, favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. fixed-charge coverage fixed-charge coverage The number of times that a firm's operating income exceeds its fixed payments. Fixed-charge coverage is a measure of a firm's ability to meet contractually fixed payments, with high coverage indicating significant flexibility for making and access to capital markets. Further, A.M. Best has affirmed the financial strength ratings of the property/casualty affiliates of Unitrin Property and Casualty Insurance Group. The financial strength ratings have been downgraded to A (Excellent) from A+ (Superior) for the following members of the Unitrin Property and Casualty Insurance Group: -- Trinity Universal Ins Co -- Alpha Property & Casualty Ins -- Charter County Mutual Ins Co -- Charter Indemnity Company -- Financial Indemnity Company -- Kemper Auto & Home Ins Co -- Kemper Independence Ins Co -- Milwaukee Casualty Ins Co -- Milwaukee Mutual Ins Co -- Milwaukee Safeguard Ins Co -- Security National Ins Co -- Trinity Lloyds Insurance Co -- Trinity Universal Ins Co KS -- Union National Fire Ins Co -- Unitrin Direct Insurance Co -- Valley Insurance Company -- Valley Property & Casualty Ins The following financial strength ratings have been affirmed for these property/casualty affiliates of Unitrin Property and Casualty Insurance Group: -- Capital County Mutual Fire Insurance Company A (Excellent) -- Old Reliable Insurance Company A- (Excellent) -- United Casualty Insurance Company of America A (Excellent) The following financial strength ratings have been affirmed for these life/health subsidiaries of Unitrin Property and Casualty Insurance Group: -- United Insurance Company of America A (Excellent) -- Union National Life Insurance Company A (Excellent) -- Reliable Life Insurance Company A (Excellent) -- NationalCare Insurance Company A- (Excellent) -- Reserve National Insurance Company A- (Excellent) The following rating has been assigned to existing debt: Unitrin Inc.-- -- "a-" on $300 million 5.75% senior notes, due 2007 The following indicative ratings have been assigned: Unitrin Inc.-- -- "a-" on senior debt -- "bbb+" on subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". -- "bbb" on preferred stock 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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