American Eagle Insurance downgraded from "B" (Fair) TO "D" (Poor).OLDWICK, N.J.--(BUSINESS WIRE)--March 25, 1997--Effective immediately, the Vulnerable "B" (Fair) rating on American Eagle Insurance Co., Dallas, is lowered to "D" (Poor). The rating reflects A.M. Best Co.'s view that the company's weakened financial condition makes it extremely vulnerable to unfavorable changes in 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. or economic condition and to potential regulatory response, given that its capitalization has fallen below the mandatory control level of risk-based capital. 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. is based on the substantial deterioration of American Eagle's financial condition and follows the announcement of a $45.7 million net loss for the year ended 1996. The loss included an unexpected $30 million fourth-quarter charge for reserve additions and 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. costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc discontinued 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: businesses, as well as continuing core aviation operations. As a result, the company's 1996 statutory surplus has plummeted 60% from the prior year-end. The company's year-end balance sheet is therefore extremely leveraged, with $110.1 million of net written premiums and $73.0 million of year-end loss reserves supported by $20.4 million in surplus. In addition, American Financial Group, Inc., which recently made a $35 million capital investment in American Eagle, has notified the company that it will not proceed with the implementation of the previously announced agreement to provide the company's insureds with the financial security of policies issued by American Financial's insurance subsidiaries. Also, the two representatives of American Financial on the company's board have resigned. The alliance with American Financial was expected to stabilize American Eagle's deteriorating financial condition at that time and provide American Eagle with other product expertise and expansion opportunities that also will not be realized. The company has entered an expanded underwriting agreement Underwriting agreement The contract between a corporation issuing new publicly offered securities and the managing underwriter as agent for the underwriting group. Compare to agreement among underwriters. with Zurich Re Centre (ZRC ZRC Zonal Research Center ) to make the financial security of policies issued by ZRC available to the company's insureds. American Eagle also announced the sale of its artisan contractors book of business, which completes its disposition of non-core lines. Earlier, American Eagle had disclosed plans 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: its auto dealers program and transportation lines of business and focus resources on traditional aviation products. The company is pursuing capital and strategic alternatives, which may include the sale of the company or its assets, a rights offering to shareholders or a sale of securities. A.M. Best will closely monitor American Eagle's financial condition, which may be subject to further loss-reserve development or potential regulatory response. A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source. CONTACT: A.M. Best Co. Jeffrey Dunsavage, 908/439-2200, ext. 5618 http://www.ambest.com |
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