A.M. Best Lowers Ratings Of Insurance Units Of Montgomery Ward & Co.

OLDWICK, N.J.--(BUSINESS WIRE)--April 2, 1997--Effective immediately, A. M. Best Co. has lowered the ratings on the Signature Group of insurance companies to "B++" (Very Good) from "A-" (Excellent) and placed the companies under review with negative implications.

The companies affected are Montgomery Ward Life Insurance Co., Forum Insurance Co., Montgomery Ward Insurance Co. and Signature Life Insurance Co., all of Schaumburg, Ill. These companies are members of the Signature Group, one of the nation's largest direct-marketing companies, offering insurance products, auto-club products and other consumer services.

This action follows the filing of a regulatory report by the group's ultimate parent, Montgomery Ward & Co., that it recorded a $249 million net loss for the year ended Dec. 31, 1996. The downgrade from the "Excellent" category reflects the poor financial condition of Montgomery Ward. The decision to maintain Secure ratings on the companies, given A.M. Best's concerns about the financial strength of Montgomery Ward, reflects the strategic relationship that exists with General Electric Credit Corp., which owns 57% of Montgomery Ward and has other significant financial interests in the organization.

Montgomery Ward & Co., maintains a relatively high degree of financial leverage (reflected by its consolidated debt-to-capital position of 65% at year end 1996) and has approximately $1 billion of debt due to its bank creditors in August 1997. The company's weakened operating performance--expected to continue through the first half of 1997--combined with its weak cash flow, raises concerns about the organization's ability to service its outstanding debt and creates uncertainty about the future ownership of the Signature Group.

A.M. Best also recognizes the initiatives of Montgomery Ward's new management team in pursuing a strategic review of its recapitalization and restructuring alternatives. These initiatives, which may include the disposition of certain assets, are expected to improve the organization's financial condition and are expected to be presented to its creditors before the end of the second quarter of 1997.

A.M. Best's review will focus on the viability of Montgomery Ward, the uncertainty of the future ownership position and ongoing support provided by General Electric Capital Corp., and the potential impact on the Signature Group's marketing activities if it is no longer part of the Montgomery Ward organization. A significant portion of the Signature Group's revenues--and, hence, the earnings of the insurance operations--is derived from Montgomery Ward customers.

A.M. Best also will monitor any cash demands that may be placed on the Signature Group and the impact this would have on its Secure rating designation, if it remains part of Montgomery Ward. The ratings will remain under review pending discussions with management regarding the outcome of the parent company's debt refinancing and corporate restructuring.

A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source.

CONTACT: A.M. Best Co., Oldwick

Jeffrey Dunsavage

[phone], ext. 5618

http://www.ambest.com