A.M. Best Lowers Ratings of Americo's Key Operating Subsidiaries; Assigns Initial Debt Rating to Americo Life Inc.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Sept. 19, 2002 A.M. Best Co. has lowered the financial strength ratings to A- (Excellent) from A (Excellent) of Americo Financial Life and Annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. Insurance Company (Americo Financial) and Great Southern Life Insurance Company, both located in Dallas. In addition, a "bbb-" rating has been assigned to the existing senior 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". issued by Americo Life, Inc. (Americo Life). The financial strength ratings on the group's other life/health insurance subsidiaries have also been 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. . All ratings have been assigned a stable outlook. These rating actions reflect the degree of financial leverage maintained at the insurance holding company, Americo Life, relative to its interest coverage and the level of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. on the group's balance sheet compared to its equity base. The action also reflects Americo Life's somewhat limited business profile as the organization tries to strengthen its brand identity within the independent distribution channel of its core individual life and annuity lines. Moreover, the ratings consider the group's exposure to interest rate risk due to its interest sensitive life and annuity business. Offsetting these negative factors are the group's improving GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). profitability, growth in new life sales and enhanced distribution. The ratings also recognize the group's solid investment portfolio, the adequate statutory capital position of Americo Financial and its operating affiliates and the stability of Americo Life's ownership and management. The majority of Americo Life's earnings are generated from its acquired blocks of mature individual life insurance, which have experienced favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. mortality. Americo Life's core life and annuity business produces earnings and cash flow that adequately support fixed charges. Recent life and annuity sales have been augmented by the recruiting of new independent marketing organizations and a focus on strategic markets. Nevertheless, A.M. Best expects Americo Life will be challenged to significantly grow its businesses and enhance its market presence and overall business profile in the individual life and annuity market given these relatively new distribution relationships and intense competition from larger, more diverse 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. providers. The life insurance subsidiaries maintain adequate risk-adjusted 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. given the debt servicing requirements of Americo Life. The organization has reduced its debt levels in recent years; however, A.M. Best believes its financial leverage--debt to total capital of approximately 31%--is still somewhat high considering its modest coverage relative to peer companies. Furthermore, the value of business acquired--established as a result of acquisitions--combined with deferred acquisition costs creates a high level of intangible assets relative to equity. Americo Life, Inc., headquartered in Kansas City Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). , is a privately-owned financial services holding company which, through its subsidiaries, specializes in marketing life and annuity products. As of June 30, 2002, Americo Life reported consolidated assets of $4.5 billion and stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. of $259 million. The financial strength rating of A- (Excellent) has been affirmed for the following subsidiary of Americo Life Group: - Ohio State Life Insurance Company Ohio State Life Insurance Company's business is fully reinsured through the enterprise. The financial strength rating of B+ (Very Good) has been affirmed for the following subsidiary of Americo Life Group: - National Farmers Union Life Insurance Company The following debt rating has been assigned: Americo Life, Inc. -- -- "bbb-" rating on existing $100 million 9.25% unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. senior subordinated notes, due June 2005 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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