A.M. Best Lowers Rating of Integrity Life And Subsidiary to A- -Excellent- From A.OLDWICK, N.J.--(BUSINESS WIRE)--July 29, 1999-- A.M. Best Co. today lowered the financial strength rating of Integrity Life Insurance Co., Louisville, Ky., and its wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , National Integrity Life Insurance Co., New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , to A- (Excellent) from A (Excellent). A.M. Best also placed the ratings under review with developing implications. This action follows the announcement by ARM Financial Group, Inc.--the parent company of the insurers--that it has incurred a net loss of approximately $174 million related to the restructuring of its institutional businesses and positioning of the company for sale. The lower rating reflects ARM's increased financial leverage and weakened fixed coverage capacity as a result of the net losses reported today and the uncertainty surrounding its future ownership. The rating will remain under review pending further discussions with management regarding the revenue and earnings capacity and capital needs of its ongoing businesses. The rating status also will be maintained pending resolution of ownership and a review of the strategic opportunities and financial strength of the prospective buyers of ARM Financial, should the company be sold. As part of ARM Financial's restructuring activities, General American Gen·er·al American n. The speech of native speakers of American English that many consider to be typical of the United States, noted for its exclusion of phonological forms readily recognized as regional or limited to particular social groups and for Life Insurance Co. will recapture recapture n. in income tax, the requirement that the taxpayer pay the amount of tax savings from past years due to accelerated depreciation or deferred capital gains upon sale of property. (See: income tax) RECAPTURE, war. approximately $3.5 billion of assets and liabilities related to funding agreements Funding Agreement Illiquid insurance contracts that provide guaranteed principal repayment and interest payments for a predetermined period of time. Notes: Funding agreements are marketed to mutual fund companies and municipal reinvestments. and guaranteed investment contracts Guaranteed investment contract (GIC) A pure investment product in which a life company agrees, for a single premium, to pay at a maturity date the principal amount of a predetermined annual crediting (interest) rate over the life of the investment. . This business previously was ceded to Integrity Life Insurance Co. in connection with a marketing partnership agreement with General American. In addition to net charges of approximately $90 million related to the completion of this transaction, ARM Financial will take a charge of about $74 million to reduce the risk profile of its remaining institutional business. While A.M. Best notes that the recapture of business by General American will improve ARM Financial's insurance entities' statutory capitalization (capital to assets), the rating agency also notes that capitalization and financial leverage at the parent company will significantly deteriorate de·te·ri·o·rate v. 1. To grow worse in function or condition. 2. To weaken or disintegrate. . Despite this negative impact, A.M. Best views the restructuring favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. because it reduces the company's overall risk profile, which considerably improves the prospects of a potential sale. A.M. Best also believes the company's ongoing retail business has been well positioned for sustained growth as a result of its continued expansion of distribution capacity. Its strong product development and technological capabilities also are attractive to potential purchasers. 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 www.ambest.com. |
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