A.M. Best Places Ratings of United National Group and Penn-America Group Inc. Under Review.OLDWICK, N.J. -- A.M. Best Co. has placed the financial strength ratings of A (Excellent) of United National Group (United National) (Bala Cynwyd, PA) (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : UNGL UNGL United National Group Ltd ) under review with developing implications. The A- (Excellent) rating assigned to the Penn-America Group Inc. (Penn-America) (Hatboro, PA) (NYSE NYSE See: New York Stock Exchange : PNG (Portable Network Graphics) A bitmapped graphics file format endorsed by the World Wide Web Consortium. It is expected to eventually replace the GIF format, because there are lingering legal problems with GIFs. ) has also been placed under review with developing implications. These rating actions follow today's announcement that the two companies plan to merge through a taxable exchange of stock. Under the terms of the transaction, Penn-America's public shareholders will receive $15.375 per share, comprised of $1.50 in cash and the balance in UNGL stock. Separately, United National Insurance Company will acquire Penn Independent Corporation and its 31% ownership in Penn-America for $97 million in cash. Operations of both United National and Penn-America will be part of the publicly-traded company, renamed United America Indemnity, Ltd. The developing implications assigned to United National reflect the effects of the proposed merger and the expectation that pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma 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. will be maintained at the current rating level of A (Excellent) or higher. This level of pro forma capital includes the reduction in cash and liquidity that will occur subsequent to United National Insurance Company's purchase of Penn-Independent Corp. A.M. Best is currently in discussions with management regarding the level of inter-company debt maintained at UN Holdings (United National Insurance Company's intermediate parent holding company) and other capital allocation strategies as it relates to United National's domestic and certain offshore affiliates. The latter has become increasingly important since United National is now ceding cede tr.v. ced·ed, ced·ing, cedes 1. To surrender possession of, especially by treaty. See Synonyms at relinquish. 2. a significant portion of its business to offshore affiliates in 2004. The Penn-America rating currently carries a positive outlook, which indicates the potential future direction of the rating over an intermediate period, generally defined as 12 to 36 months. The developing implications reflect the effects of the proposed merger, which could cause A.M. Best to remove the positive outlook. If A.M. Best becomes comfortable with these issues, the positive outlook would likely remain intact based on the stand-alone attributes of the group, its continued profitability and success through 2004. Although maintaining separate and distinct pools, the combination should benefit both organizations through better overall business diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. , geographic spread and its enhanced financial flexibility. Given its proposed structure, this merger is not expected to afford expense savings through integration. The new combined organization would rank among the top 15 largest writers of excess and surplus lines premium in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . As of June 30, 2004, pro forma consolidated GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). equity for these two groups total $557 million. A.M. Best expects to conclude its review upon the close of the transaction, which is subject to regulatory approvals. The A (Excellent) financial strength ratings of the following subsidiaries of United National Group have been placed under review with developing implications: --Diamond State Insurance Company --United National Casualty Insurance Company --United National Insurance Company --United National Specialty Insurance Company The A- (Excellent) financial strength ratings of the following subsidiaries of Penn-America Group have been placed under review with developing implications: --Penn-America Insurance Company --Penn-Star Insurance Company For current Best's ratings Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. , independent data and analysis on more than 3,000 individual property/casualty companies, groups and industry composites, please visit http://www.ambest.com/pc. 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 http://www.ambest.com. |
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