Fitch Upgrades/Affirms Subsidiaries of Ceres Group, Inc.Business Editors CHICAGO--(BUSINESS WIRE)--April 8, 2003 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. has upgraded the insurer financial strength rating of Central Reserve Life Insurance Company (CRL CRL - Carnegie Representation Language. Carnegie Group, Inc. Frame language derived from SRL. Written in Common LISP. Used in the product Knowledge Craft. ) to 'BBB-' from 'BB', and has affirmed the 'BBB' insurer financial strength rating of Continental General Insurance Company (CGI CGI in full Common Gateway Interface. Specification by which a Web server passes data between itself and an application program. Typically, a Web user will make a request of the Web server, which in turn passes the request to a CGI application program. ). The ratings of both companies have been removed from Rating Watch, and the Rating Outlook is Stable. Both CRL and CGI are insurance operating companies of Ceres Group, Inc. Today's rating action follows the March 31st completion of Ceres Group's sale of Pyramid Life Insurance Company (Pyramid) to a subsidiary of Universal American Financial Corp. Pyramid was a subsidiary of CGI. The sale of Pyramid helped to bolster the capital position of CGI, which fell significantly in 2002 due primarily to an operating loss 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. . CGI's 2002 statutory net operating loss of $12.8 million was driven by unusually high claims payments during the year resulting from the clearing of a claims backlog within the company. Fitch expects CGI to report positive statutory 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 in 2003. The Pyramid divestiture also enabled Ceres Group to pay down $10 million in bank debt. At year-end 2002, Ceres Group reported a debt-to-total capital ratio of 13.9%. Fitch estimates that the first quarter reduction in bank debt will push the company's financial leverage below 10%. The upgrade of CRL reflects improved statutory operating performance for the company in 2002, coupled with a stronger risk adjusted capital position. For 2002, CRL reported a statutory operating gain of $7.9 million compared to a statutory operating loss of $10.8 million in 2001. CRL's NAIC NAIC See National Association of Investors Corporation (NAIC). risk-based capital ratio Risk-based capital ratio Bank requirement that there be a minimum ratio of estimated total capital to estimated risk-weighted asset. , which was reported at 132% of the company action level at year-end 2001, reached 218% at year-end 2002 primarily due to improved capital and a reduction in business volume. Ceres Group, through its subsidiaries, offers a variety of health and life insurance products to individuals, associations and small employers. The company has increasingly focused on the rapidly growing senior life and health market in recent years. For 2002, the company reported consolidated pretax operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , including the operations of Pyramid, of $11.9 million (adjusted for realized capital gains) on revenue of approximately $705 million. Entity/Issue Type Action Rating/Outlook Central Reserve Life Insurance Company -- Insurer financial strength Upgrade 'BBB-'/Stable. Continental General Insurance Company -- Insurer financial strength Affirm 'BBB'/Stable. |
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