A.M. Best Places Ratings of Gulf Insurance Group Under Review; Downgrades Rating of TNC Insurance Group.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 29, 2004 A.M. Best Co. has placed the financial strength rating of A (Excellent) of Gulf Insurance Group (Gulf) (Hartford, CT) under review with developing implications. Concurrently, A.M. Best has downgraded the financial strength rating to A (Excellent) from A+ (Superior) of TNC (hardware) TNC - A threaded version of a BNC. Insurance Group (TNC) (Minnesota). Both groups are units of Travelers Property Casualty Corp. (NYSE NYSE See: New York Stock Exchange : TAP.A and TAP.B) (Travelers) (Hartford, CT). The TNC rating has been removed from under review and a stable outlook has been assigned. These rating actions follow Travelers' fourth-quarter earnings announcement, which disclosed significant additional reserve strengthening required at both Gulf and TNC that resulted in substantial underwriting and 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. for these two independently rated groups. The rating action regarding Gulf reflects the substantial deterioration in capitalization primarily resulting from $252 million in pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern charges relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the strengthening of prior year reserves and uncollectible reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. recoverables. In connection with the reserve strengthening, $200 million of capital infusions Capital infusion Often refers to the cross-subsidization of divisions within a firm. When one division is not doing well, it might benefit from an infusion of new funds from the more successful divisions. were made by Travelers in the fourth quarter. The ratings also consider Travelers' intent to continue to fully support the liabilities of Gulf with certain intercompany transaction Intercompany transaction Transaction carried out between two units of the same corporation. agreements, which require state regulatory approval that is anticipated to occur within 45 days. The under review status assigned to Gulf's rating reflects the pending approval and completion of such intercompany transaction agreements. In the event these agreements are not successfully approved and completed, Gulf's current rating is likely to be downgraded. Conversely, if the agreements are approved and completed, Gulf's rating is likely to be aligned with Travelers Property Casualty Pool. 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 TNC's rating reflects its continued poor operating performance in 2003, which is primarily attributable to $115 million of reserve strengthening by the American Equity pool members of TNC, whose operations are currently in run-off. While modest reserve strengthening was reported within TNC's ongoing insurance operations in 2003, these businesses continue to be profitable and are viewed to be of strategic importance to Travelers' commercial middle market operations. The downgrade also reflects the deterioration in the group's capitalization in the fourth quarter, albeit supportive of its current rating. Travelers' other financial strength and debt ratings are unaffected by these rating actions. For a comprehensive list of Gulf Insurance Group and TNC Insurance Group's financial strength ratings, please visit www.ambest.com/press/012902gulftnc.pdf. For a complete list of A.M. Best's debt ratings, please visit http://www3.ambest.com/debtratings/. 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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