LIFE INSURANCE COMPANY OF THE SOUTHWEST CLAIMS PAYING ABILITY RATING REAFFIRMED AT 'AA-' BY DUFF & PHELPS
CHICAGO, Sept. 9 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has reaffirmed the 'AA-' (Double-A-Minus) claims paying ability of Life Insurance Company of the Southwest (LSW). The rating reflects the company's good asset quality, improving operating leverage and support of its ultimate majority owner, Vereinigte Haftpflicht Versicherung, V.A.G. (VHV). Weighed against these positives are LSW's moderate size, moderate profitability in 1992 and flat sales over the past few years. LSW is a stock life insurer based in Dallas with admitted assets of $1.4 billion and adjusted surplus of $81 million at June 30, 1993. The company's ownership is currently divided primarily between VHV (56 percent) and Swiss Re (40 percent). VHV is a mutually owned property/casualty insurer domiciled in Hannover, Germany with assets of $1 billion and equity of $200 million at Dec. 31, 1992. During the summer of 1993, LSW announced that its U.S. holding company, LSW Holding Corporation (LSW Holdings) had entered into an agreement with Hannover Ruckversicherung, A.G. (Hannover Re), a major international reinsurer, for Hannover Re to acquire newly issued shares representing 25 percent of LSW Holdings for $32 million cash. Concurrent with this transaction, subsidiaries of VHV will convert $30 million of LSW Holdings' debt to equity. As a result of these transactions, the debt of LSW Holdings will be reduced to $13 million and the capital of LSW will be increased by $10 million. Regulatory approvals of this transaction are expected in the fall of 1993. Operating leverage improved over the 3-year period ending at yearend 1992 to 17.29 times from 20.77 times. As a result of the capital infusion, the pro forma operating leverage will decrease from 16.80 times at June 30, 1993 to 14.95 times. Gross premium income and deposits decreased from $195 million for 1991 to $174 million for 1992. First half 1993 premiums of $83 million were consistent with the same period in 1992. Net operating gain fell from $11 million in 1991 to $6 million, primarily due to $3.5 million in extraordinary expense items. Return on average admitted assets was 0.84 percent in 1992 versus 1.65 percent in 1991 and return on adjusted surplus was 9.1 percent versus 21.2 percent for the same periods. Overall, LSW has good asset quality. At Dec. 31, 1992, bonds, including government backed collateralized mortgage obligations, represented 81 percent of total invested assets. At yearend 1992, surplus exposure to high yield securities was 34 percent versus 57 percent for 1991 and 131.9 percent for 1990. The mortgage loan portfolio is indemnified against losses by LSW's former owner. Mortgage loans represented 13 percent of total invested assets at yearend 1992. LSW's total surplus exposure to troubled real estate was 28 percent at yearend 1992. -0- 9/9/93 /CONTACT: Sandra A. Seidl of Duff & Phelps Credit Rating Co., 312-368-3116/ .
CO: Life Insurance Company of the Southwest ST: Texas IN: INS SU: RTG
SM -- NY024 -- 0261 09/09/93 11:06 EDT
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|Date:||Sep 9, 1993|
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