AmerUs Group Co. Rtgs Raised on Improved Performance.Business Editors NEW YORK--(BUSINESS WIRE)--Standard & Poor's Feb. 21, 2002--Standard & Poor's today raised its ratings on AmerUs Group Co. and related entities (see list). The outlook is stable. The rating action on these companies (collectively referred to as AmerUs Group) reflects improved operating performance, increased 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. of earnings and distribution sources, and continuation of strong revenue growth. In 2001, AmerUs Group achieved double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. growth in individual 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. sales, reflecting its strong and diversified diversified (di·verˑ·s distribution systems, along with improved operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before that reflect effective spread and expense management. Management also successfully integrated Indianapolis Indianapolis (ĭn'dēənă`pəlĭs), city (1990 pop. 731,327), state capital and seat of Marion co., central Ind., on the White River; selected 1820 as the site of the state capital (which was moved there in 1825), inc. 1847. Life Insurance Co. (Indianapolis Life), which it acquired on May 21, 2001, harnessing the productivity of Indianapolis Life's distribution and reducing operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . As a result, AmerUs Group improved its diversification of operating earnings, with life insurance and annuity business contributing about 50% of the total. Standard & Poor's today also placed its single-'A' counterparty Counterparty The other participant, including intermediaries, in a swap or contract. credit and financial strength ratings on IL Annuity on CreditWatch with negative implications. This action reflects the decision of AmerUs Group management to discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: writing new business in IL Annuity, along with IL Annuity's stand-alone (jargon) stand-alone - Capable of operating without other programs, libraries, computers, hardware, networks, etc. Exactly what is absent is presumed to be obvious from context. "We only run Windows on stand-alone PCs because it's too dangerous to run it on networked ones." financial strength. However, if the ratings are lowered, they are not expected to fall below the triple-'B' range. Major Rating Factors: -- AmerUs Group's business position is very strong because of its well established distribution relationships within the AmerUs Life Insurance Co. (AmerUs Life), American Investors Life Insurance Co. (American Investors), and Indianapolis Life organizations. The group holds a top market position in the distribution of fixed annuities through independent agents and maintains a good position in the small business and upper-middle-income markets for life insurance products. In 2001, sales growth for life insurance and annuity products reflected double-digit growth. -- AmerUs Group's operating performance is strong. The group improved its GAAP operating earnings to $114 million, and its ROE to 10.8%, in 2001. Earnings performance reflects strong business fundamentals, consistent mortality and persistency experience, active spread management, and improved expense management. Earnings improvement is contingent on margin improvement, growth in assets, and further expense reduction in the group's operations. -- AmerUs Group maintains a very strong risk-adjusted capital position, as demonstrated by a Standard & Poor's capital adequacy ratio of about 155%. Capitalization has stabilized in recent years. Strong statutory earnings and a reduction in MBS holdings have contributed to maintaining a very strong level, although future levels could be pressured by continuous premium growth. AmerUs Group is expected to pursue reinsurance to mitigate the strain related to this growth. -- Financial leverage of 20%, and fixed-charge coverage of 8 times (x), as of year-end 2001, are well within tolerance levels for the current ratings. -- AmerUs Group's strategy is mildly aggressive because of its appetite for mergers and acquisitions. However, this risk is somewhat mitigated both by the improved risk profile of the group and by a proven track record of success with prior acquisitions. -- AmerUs Group operates in the increasingly competitive individual fixed-annuity and life-insurance markets, and its positions in these lines will remain pressured by ongoing consolidation. -- AmerUs Group maintains a strong liquidity profile, as demonstrated by AmerUs Life's and American Investors' liquidity ratios of more than 200%. Liquidity is supported by the high credit quality of the group's investment portfolio and the generally well protected liability structure. -- The credit quality of AmerUs Group's investment portfolio appears strong, as demonstrated by its holdings of 93% investment-grade, fixed-income securities. The fixed-income portfolio, which accounts for about 89% of invested assets, consists primarily of corporate bonds and MBS. In 2000 and 2001, the company reduced its exposure to MBS, and these now account for about 14% of invested assets, down from 24% in 1999). Although the portfolio is of high credit quality, and the group's MBS portfolio is well structured, AmerUs Group's liability profile contains a level of interest-rate risk, specifically in a volatile interest rate environment. This risk is somewhat offset by good use of asset-liability management techniques. OUTLOOK: STABLE Standard & Poor's expects AmerUs Group's life insurance sales to increase 8%-10% in 2002, because of increased distribution capacity and the success of new product introductions. Fixed annuity Fixed Annuity An insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until the annuitant dies. The insurance company guarantees both earnings and principal. and other asset-accumulation product sales, though contingent on Adj. 1. contingent on - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent upon, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent market conditions, are expected to increase 5%-7%. Improvement in GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). earnings should follow continued strong earnings fundamentals and some merger expense efficiencies. Total leverage should remain at or below 25%, which is management's target position, while the consolidated capital adequacy ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. remains above 150%. Fixed-charge coverage fixed-charge coverage The number of times that a firm's operating income exceeds its fixed payments. Fixed-charge coverage is a measure of a firm's ability to meet contractually fixed payments, with high coverage indicating significant flexibility for making is expected to remain in excess of 7x.
RATINGS RAISED
TO FROM
AmerUs Group Co.
Counterparty credit rating BBB+/Stable BBB/Positive
Senior unsecured debt BBB+ BBB
Preferred stock BBB- BB+
American Investors Life Insurance Co. Inc.
AmerUs Life Insurance Co.
Bankers Life Insurance Co. of NY
Western Security Life Insurance Co.
Counterparty credit rating A+/Stable A/Positive
Financial strength rating A+ A
Indianapolis Life Insurance Co.
Counterparty credit rating A+/Stable A/Positive
Financial strength rating A+ A
Sububordinated debt A- BBB+
Delta Life & Annuity Co.
Financial Benefit Life Insurance Co.
Financial strength rating(a) BBB+ BBB
(a)Guaranteed by AmerUs Group Co.
AmerUs Capital I
AmerUs Capital II
Preferred stock(a) BBB- BB+
((a) Guaranteed by AmerUs Group Co.)
RATINGS PLACED ON CREDITWATCH WITH NEGATIVE IMPLICATIONS
IL Annuity
Counterparty credit rating A
Financial strength rating A
Copyright 2002, Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. |
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