S&P Affirms First Central Nat'l Life Ins NY 'Api'.

Business Editors

NEW YORK--(BUSINESS WIRE)--March 7, 2000

Standard & Poor's today affirmed its single-'Api' financial strength rating on First Central National Life Insurance Co. of New York (FCNL).

FCNL, domiciled in New York, specializes in writing credit life and credit disability coverage sold primarily through the consumer finance network. The company is licensed in New York and Delaware and operates in 34 states. FCNL commenced operations in 1971 and is headquartered in New York, New York.

Effective Dec. 31, 1999, FCNL was transferred and is now a wholly owned subsidiary of Household Life Insurance Co. (Household Life, financial strength rating single-'Api'). The ultimate parent, Household International Inc., is the second-largest consumer finance agency in the U.S., offering home equity loans, unsecured consumer loans, co-branded and private label credit cards, and automobile finance loans. FCNL is the New York marketing arm for both of its parents. All the insurance entities of the parent are administered under one management group.

Major Rating Factors:

-- Standard and Poor's believes FCNL is strategically important to Household Life and therefore group support is a factor in the rating.

-- At year-end 1998, capitalization and liquidity were extremely strong, in excess of 300%, as measured by Standard and Poor's models.

-- Operating performance has been extremely strong, with the average return on assets of 5% from 1993-1998. Retained earnings, as measured by unassigned surplus to assets of 58%, are considered good.

-- Premium and annuity considerations have been volatile in the last five years. Premium income increased at double digit rates from 1993 to 1996, then dipped 26% to $9 million in 1997. At that time the company divested itself of businesses sold through third parties. At year-end 1998, premium income increased 16% to $10 million as growth continued in the credit life and credit disability lines.

-- Geographic and product line concentration was high, with 99% of direct premiums written in New York. Geographic and product line concentration can expose a company to regulatory, economic, and competitive risk.

'Pi' ratings, denoted with a 'pi' subscript, are insurer financial strength ratings based on an analysis of an insurer's published financial information and additional information in the public domain. They do not reflect in-depth meetings with an insurer's management and are therefore based on less comprehensive information than ratings without a 'pi' subscript. 'Pi' ratings are reviewed annually based on a new year's financial statements, but may be reviewed on an interim basis if a major event that may affect the insurer's financial security occurs. Ratings with a 'pi' subscript are not subject to potential CreditWatch listings.

Ratings with a 'pi' subscript generally are not modified with 'plus' or 'minus' designations. However, such designations may be assigned when the insurer's financial strength rating is constrained by sovereign risk or the credit quality of a parent company or affiliated group, Standard & Poor's said. -- CreditWire