Fitch Affirms Jefferson-Pilot Corporation's Ratings; Outlook Stable.NEW YORK New York, state, United StatesNew York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. today affirmed the 'AA-' long-term issuer and senior debt ratings of Jefferson-Pilot Corporation (JPC JPC Joint Parliamentary Committee (India) JPC John Paul College (Queensland, Australia) JPC Joint Propulsion Conference JPC Joint Planning Committee JPC Jpeg-2000 Code stream ), as well as the 'F1+' short-term and commercial paper ratings. At the same time, Fitch affirmed the 'AA+' financial strength ratings of JPC's insurance subsidiaries. The Rating Outlook is Stable. A complete list of ratings follows at the end of this release. JPC's very strong ratings reflect the group's continued above-average profitability in a difficult interest rate environment, strong liquidity, moderate financial leverage and sound risk-based capitalization. The rating also recognizes the diversification provided by JPC's group life and health operations and the communications segment as well as the capital support provided by marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has held in non-regulated entities. JPC's very strong and stable earnings with all segments contributing on a consistent basis is a primary driver of the rating. The group's profitability has been and continues to be superior in terms of a number of ratios, including GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). return on equity (ROE) and return on assets Return on assets (ROA) Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets). (ROA ROA See: Return on assets ROA See: Right of accumulation ROA See return on assets (ROA). ) and statutory ROA and return on surplus (ROS ROS, n.pr See reactive oxygen species. ). JPC's five-year average GAAP ROA and ROE are high relative to peers at 2.51% and 14.7% respectively through 2004. Weighed against these positives is JPC's above-average exposure to interest rate risk through its participation in the 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 universal life markets. In the current ongoing low interest rate environment, interest margin compression has negatively affected life and annuity earnings. In addition, about one-half of new universal life premiums are derived from products with secondary guarantees. Fitch believes these products increase JPC's risk profile, as the market is experiencing significant price competition and industry reserving methods have come under scrutiny. Growth in income in the Benefit Partners and Communications segments is offsetting slight declines in the life and annuity segments, contributing to an overall modest 2% increase in pretax GAAP 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 for the year. That trend is expected to continue in 2005. JPC's financial leverage increased somewhat in 2004 following the issuance of $600 million in senior debt in the first quarter of 2004. However, JPC used part of the proceeds to pay down commercial paper, and the resulting leverage is within expectations at about 19.3%. GAAP interest coverage continues to be very strong. Fitch has maintained the two-notch difference between the insurer financial strength (IFS) and debt ratings, instead of the more common three-notch difference, because of the relatively low targeted leverage and high fixed-charge coverage, as well as the cash flows from the communications subsidiary, the below-market carrying value of the communications subsidiary and marketable securities at non-regulated subsidiaries. Fitch affirms Jefferson-Pilot Corp.'s long-term issuer and senior debt ratings at 'AA-'. The Rating Outlook is Stable. Senior debt rating affirmations include the following: -- $300,000,000 4.75% senior note due Jan. 27, 2014; -- $300,000,000 monthly extendible notes (EXLS) due Feb. 17, 2011. Fitch also affirms JPC's commercial paper issuer rating at 'F1+' and the 'F1+' on the EXLS. Fitch affirms the 'A+' preferred stock rating for: -- $200,000,000 8.14% capital security due Jan. 15, 2046; -- $100,000,000 8.29% capital security due Mar. 1, 2046. Fitch affirms the following insurance subsidiaries' insurer financial strength (IFS) ratings at 'AA+'. The Rating Outlook is Stable: -- Jefferson-Pilot Life Insurance Company -- Jefferson Pilot Financial Insurance Company -- Jefferson Pilot LifeAmerica Insurance Company |
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