A.M. Best Keeps American Bankers Insurance Under Review With Developing Implications as Cendant Bid is Accepted.

OLDWICK, N.J.--(BUSINESS WIRE)--March 23, 1998--American Bankers Insurance Group's acceptance of Cendant Corp.'s $3.1 billion acquisition bid provides ABI with "major growth opportunities," A.M. Best Co. said today following American Bankers' announcement of the agreement.

These opportunities, however, "will require strong execution to realize the enhanced earnings potential," A.M. Best said. Several matters-including Cendant's level of debt and intangible assets, the need for ABI to pay a $100 million "break-up fee" to former suitor American International Group, and integration issues related to ABI's acquisition by a noninsurance parent-remain to be discussed in greater detail with management. Therefore, ABI's ratings remain under review with developing implications.

"There are clear marketing synergies" between ABI, a Miami, Fla.-based specialty insurer, and Cendant, a Parsippany, N.J.-based provider of consumer and business services, said A.M. Best financial analyst Wai Tung. "The acquisition offers ABI access to Cendant's extensive distribution channels, as well as cross-selling opportunities."

At the same time, the acquisition, which caps a two-month bidding war between Cendant and AIG, involves substantial debt.

"It's important to look at the debt in context," Mr. Tung said. "Cendant is different from traditional insurance holding companies, and it may not be overly leveraged relative to its peers. We need to evaluate the uses and characteristics of the various debt instruments. Most important will be Cendant's ability to service its debt and sustain its profitability. We will be meeting with management to iron these issues out."

Every acquisition involves integration issues, and these issues are particularly relevant when an insurer is acquired by a non-insurance company, Mr. Tung said.

"We take some comfort in the fact that Cendant plans to keep the insurance company intact and leave American Bankers personnel in charge," he added. "This ensures a degree of continuity."

American Bankers Insurance Group is rated "A-". Its property/casualty units carry the group rating, and its primary life unit is rated "A". These ratings have been under review with developing implications since Dec. 23, 1997, reflecting the proposed sale.

They will remain under review until the transaction closes.

A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.

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