A.M. Best Places Reliance Insurance Group Rating Under Review With Negative Implications.OLDWICK, N.J.--(BUSINESS WIRE)--Oct. 21, 1999-- A.M. Best Co. today placed the A- (Excellent) rating of the Reliance Insurance Group, Philadelphia, under review with negative implications. The action applies to the group's U.S. and U.K. subsidiaries. It follows recent discussions with company management; A.M. Best's evaluation of Reliance's capital-raising efforts; developments related to Reliance's participation in a complex workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. program originated by Unicover Managers Inc.; and A.M. Best's review of the group's capital adequacy and financial flexibility. The rating reflects the continued uncertainty of Reliance's potential financial exposure to Unicover-related business. It also reflects challenges facing management to restore the company's capital base shortly after year-end and to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. over $500 million of holding company debt next year--of which $230 million matures at the end of the first quarter. Reliance's status also reflects the reduced time remaining for management to execute its capital-raising initiatives in the first quarter of 2000. Since A.M. Best's affirmation in early August, an additional Unicover retrocessionaire has filed suit to rescind To declare a contract void—of no legal force or binding effect—from its inception and thereby restore the parties to the positions they would have occupied had no contract ever been made. rescind v. its 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. contract potentially exposing Reliance and others to greater financial risk; capital market conditions have worsened; Reliance's financial flexibility has deteriorated further; and its surplus base has declined from continued 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. and unrealized losses Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. on its sizable stock portfolio. The group's rating remains at A- (Excellent). This reflects Reliance's commitment to improving surplus levels, maintaining A.M. Best's capital standards for this rating and refinancing Refinancing An extension and/or increase in amount of existing debt. its senior and bank debt in a timely manner. A.M. Best expects Reliance will exhibit stronger underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. results next year as its commercial specialty businesses resume their historical profit trends. A.M. Best's review will focus on management successfully completing plans to raise capital and refinance debt by the end of the first quarter 2000, as well as the progress of the Unicover litigation/settlement and its impact on Reliance. A.M. Best will closely monitor Reliance's progress and expects to complete its review during the first quarter 2000. 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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