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A.M. BEST ISSUES 318 BEST'S RATINGS IN 12TH WEEKLY RELEASE

    OLDWICK, N.J., June 21 /PRNewswire/ -- The A.M. Best Company today released the 12th edition of its 1993 Best's Rating Monitor. Best's Ratings were issued to 216 property/casualty companies and 102 life/health firms, including American International Group (property/casualty), CIGNA Insurance Group (property/casualty), Confederation Life Insurance Company, Farmers Insurance Group, ITT Hartford Insurance Group (property/casualty), Northwestern National Life Insurance Company and USAA Group.
    Based on the evaluation of year-end 1992 financial results and subsequent relevant events, Best's Ratings will be released on a weekly basis through the beginning of July. To date, Best's Ratings have been assigned to 1,598 property/casualty companies and 1,005 life/health insurers. Best's Ratings are continuously monitored throughout the year with formal rating reviews performed on six-month and nine-month financial results.
    Rating rationales for 10 property/casualty and 10 life/health groups are listed below:
    Aid Association for Lutherans, Appleton, Wis., was assigned a 1993 Best's Rating of "A++" (Superior). The company's superior financial strength was affirmed and its rating level of "A++" was unchanged.
    This rating reflects the fraternal benefit society's strong operating performance, favorable balance sheet and liquidity characteristics and conservative capitalization. This rating also acknowledges the strong position which the society holds in the fraternal community, and the stable national distribution network of career agents who target insurance sales to its nationwide membership base. This sales mechanism has resulted in extremely favorable policyholder persistency rates and contributes to the society's consistently strong earnings performance.
    "Partially offsetting these strengths is the society's exposure to mortgage investments, which has been increasing in connection with its expanded annuity operations in recent years," said Larry G. Mayewski, senior vice president of Best's life/health division. "However, A.M. Best believes that the society's conservative business practices and focus on asset/liability management will mitigate potential problems in this area," he added.
    Although Aid Association for Lutherans has considerably expanded its individual annuity operations, which now accounts for the majority of its insurance liabilities, earnings in this line have been strong and continue to improve. The society's portfolio crediting rate strategy, combined with its focus on administrative efficiency and expense management, have offset the reserving strain associated with the growth of this business. A.M. Best believes that earnings will remain strong, and will additionally benefit from the society's decision to exit the individual group medical accident and health field, where losses had posed a drain on the society's overall earnings capacity.
    Aid Association for Lutherans maintains a strong liquidity position and high-quality asset portfolio, which is supported by over $7.7 billion in investment-grade bonds, cash and short-term securities (71 percent of invested assets). At year-end 1992, problem mortgage investments (including restructured loans) accounted for a modest 1 percent of assets. Aid Association for Lutherans ranks among the 30 largest life/health insurers in the U.S. when measured by total assets.
    Alexander Hamilton Life Insurance Company of America, Farmington Hills, Mich. was assigned a 1993 Best's Rating of "A+" (Superior).  The company's superior financial strength was affirmed and its rating level of "A+" was unchanged.
    "This rating reflects Alexander Hamilton Life's strong earnings performance in recent years, its excellent liquidity position, high- quality investment portfolio and adequate capitalization," said Larry G. Mayewski, senior vice president of Best's life/health division. This rating also acknowledges the strength of the company's distribution sources and the cost benefits achieved through the sale of its products by affiliated banking and consumer finance companies.  Partially offsetting these strengths is the significant growth of the insurer's interest-sensitive businesses, which will challenge the company to manage interest rate risk through proper cash flow and asset/liability duration matching and the corresponding utilization of excess capitalization.
    "Alexander Hamilton Life, together with its subsidiary carriers, First Alexander Hamilton Life Insurance Company and Hamilton National Life Insurance Company, have experienced considerable growth in each of the past five years," Mr. Mayewski noted. Expansion of the companies' group and universal life and individual flexible premium annuity operations, combined with the stable volume of structured settlement and credit life and health business conducted, has resulted in consolidated admitted assets advancing over 180 percent since year-end 1987. Alexander Hamilton's conservative operating strategy has enabled the companies to expand core operations profitably over the past four years, generating statutory net operating gains totaling $175.4 million over this time period.
    Although the amount of insurance issued has advanced modestly in each of the past five years, the company's group life operations have accounted for an increasing amount of business issued since year- end 1990. To restore the sales momentum in its individual life segment, Alexander Hamilton is in the process of revising its universal life product line as well as reviewing possible strategic alliances with other insurers.
    At year end, the company's excellent liquidity position was supported by its favorable annual cash flows and investment-grade bonds, short-term securities and cash balances in excess of $4.3 billion (81 percent of invested assets). Alexander Hamilton Life ranks among the 60 largest life insurers in the United States when measured by total assets.
    As strategic subsidiaries of Alexander Hamilton Life Insurance Company of America, First Alexander Hamilton Life Insurance Company, Williamsville, NY, and Hamilton National Life Insurance Company, Farmington Hills, MI, were assigned 1993 Best's Ratings of "A+" (Superior). Each company's superior financial strength was affirmed and its rating level of "A+" was unchanged.
    American Agricultural Insurance Company, Indianapolis, Ind., was assigned a 1993 Best's Rating of "A" (Excellent). The company's financial strength was downgraded from "Superior" to "Excellent" and its rating was lowered from "A+" to "A".
    This rating reflects the company's adequate capitalization, moderate long-term operating earnings and unique operating position as a semi- captive company providing reinsurance and other related services to Farm Bureau Insurance companies. The company is owned by the individual Farm Bureau state companies and the American Farm Bureau Federation and its board of directors consists of the presidents of many of the companies. American Agricultural provides a strong, stable, long-term reinsurance market for its owners at affectively cost, since the company's mission is to operate on behalf of its owners on an underwriting break-even basis.  In addition, the strong relationship with its affiliated Farm Bureau companies allows the insurer greater flexibility in setting price and terms that are not as volatile as reinsurance in the open market.
    "Offsetting these positive factors was the approximately 20 percent decrease in surplus in 1992 as a result of the elevated level of weather-related losses from numerous occurrences in Kansas and Hurricane Andrew, which generated a combined ratio of over 140 in 1992," noted John H. Snyder, senior vice president of Best's property/casualty division. The company has taken several corrective actions to limit its ongoing exposures including the upward adjustment of property/casualty rates, and the placement of $60 million of additional reinsurance protection. In addition, the company is taking a 50 percent reduction of non-farm bureau business that produced a disproportionately high level of losses in 1992.  Capitalization remains excellent, with $154 million in writings supported by $114 million in surplus. American Agricultural Insurance Company ranks among the 20 largest professional reinsurers in the country with $450 million in assets.
    American Family Insurance Group, Madison, WI, was assigned a 1993 Best's Rating of "A+" (Superior). The group's superior financial strength was affirmed and its rating level of "A+" was unchanged. The rating applies to American Family Insurance Company and its subsidiary, American Standard Insurance Company of Wisconsin, which is 100 percent reinsured by the parent.
    "This rating reflects the group's continued conservative operating strategy, solid profitability, strong capitalization and favorable balance-sheet liquidity," said John H. Snyder, senior vice president of Best's property/casualty division. The group has been able to earn above-average returns by maintaining a strong market position in personal lines in a relatively small number of midwestern states, but with sufficient geographic spread to minimize the risk of concentrated property exposures. The group maintains a cost efficient operation due, in part, to a captive agent distribution system and has a five-year average expense ratio of 21, which is five points better than the industry average. The group is well capitalized with $2.1 billion in premiums supported by $1.1 billion of surplus. American Family Insurance Group ranks among the 25 largest property/casualty underwriters in the United States with $2.1 billion in premiums.
    American International Group (AIG) (property/casualty), New York, was assigned a 1993 Best's Rating of "A++" (Superior).  The group's superior financial strength was affirmed and its rating level of "A++" was unchanged. The rating applies to 17 domestic group members, led by National Union Fire Insurance Company of Pittsburgh, and eight other affiliates that are fully reinsured by these group members.
    This rating reflects the group's leadership position as the nation's largest underwriter of commercial and industrial coverages, management's conservative operating strategy, outstanding financial performance and very strong capitalization. These positive rating factors are derived from the group's dominant position in the national accounts market for large commercial specialty coverages including its professional liability and excess and surplus business and its long-term commitment to the marketplace which has reinforced its strong relationships with brokers and customers. In addition, the group has high-quality investments, strong loss reserves and excellent reinsurance protection.
    "AIG is one of the few large groups that continues to produce outstanding underwriting results with a five-year combined ratio of 102, which has outperformed the industry by eight points," said John H. Snyder, senior vice president of Best's property/casualty division. Its underwriting and reinsurance strength was demonstrated in 1992 as the group recorded a combined ratio of 105, despite two points stemming from catastrophe losses. These superior underwriting results are derived from AIG's favorable loss experience within its dominant national accounts, professional liability and excess and surplus lines. They also reflect the group's disciplined underwriting approach during soft market conditions with nominal premium growth in the past five years, as well as its commitment to maintaining adequate loss reserves throughout an underwriting cycle.
    AIG's strong operating performance combined with significant investment gains and restrained premium growth, has led to further improvements in its capitalization, with $7.1 billion of net premiums supported by $4.9 billion of surplus.  AIG is well positioned to take advantage of market opportunities as they arise in both domestic and international markets. Considerable financial flexibility is afforded by its parent holding company that has modest financial leverage, with a debt-to-equity ratio of 35 percent. The group has maintained prudent liquidity enhanced by very strong operating cashflows averaging $1.3 billion in recent years. The AIG group, which is the fourth largest property/casualty underwriter in the country, is owned by American International Group Inc., a globally diversified holding company involved in insurance and financial services businesses.
    Baldwin & Lyons Group, Indianapolis, IN, was assigned a 1993 Best's Rating of "A+" (Superior). The group's superior financial strength was affirmed and its rating level of "A+" was unchanged. This rating applies to the consolidated results of Protective Insurance Company and its two wholly-owned subsidiaries, Sagamore Insurance Company and Hoosier Insurance Company. The ultimate parent, Baldwin & Lyons Inc., is a publicly-traded insurance agency and holding company which provides other insurance related services to the trucking industry including claims handling and loss control.
    This rating reflects the group's leading market position as a provider of casualty insurance for the trucking industry, outstanding financial performance and very strong capital position.  The group provides coverage over the self-insured retention of large trucking fleets. This business is generated directly on a nationwide basis through the parent organization. The group also insures smaller, medium- sized fleets on a first-dollar or small deductible basis.
    "The group has produced consistently profitable operating results with a five-year operating ratio of 75, which is 20 points better than the industry average," according to John H. Snyder, senior vice president of Best's property/casualty division. A conservative capital position is maintained, with year-end 1992 consolidated surplus of $141 million of consolidated surplus supporting $75 million of net writings. The group's capitalization is further enhanced by a strong loss reserve position. A superior balance sheet is also maintained with 93 percent of assets invested, primarily in a high-quality, $254 million bond portfolio.
    CIGNA Insurance Group (property/casualty), Philadelphia, was assigned a 1993 Best's Rating of "A-" (Excellent). The group's excellent financial strength was affirmed and its rating level of "A-" was unchanged. The rating applies to 19 intercompany pool members, led by the Insurance Company of North America, and two affiliates that are fully reinsured by members of the pool.
    This rating reflects the group's underwriting expertise in the national accounts and commercial specialty lines, the positive implications of its restructuring plan announced in March 1993, under the direction of a new management team led by Gerald A. Isom, its strong and committed parent, CIGNA Corporation, and its adequate capitalization following several capital actions being taken by its parent.
    "Affirmation of CIGNA's rating follows a series of meetings held with management over the past several months focusing on the restructuring of the group under its new management team and the need for more tangible parental support from CIGNA Corp.," according to John H. Snyder, senior vice president of Best's property/casualty division. In order to stabilize the significant downward trends in the group's underwriting results and capitalization, CIGNA Corp. has suspended its dividend requirement in 1993 and possibly 1994, committed to infuse $150 million of capital into the group by the end of the second quarter, and will improve the investment-risk profile of the group by reducing its substantial equity holdings during the third quarter and reinvest the proceeds in investment-grade bonds.
    These positive rating factors, however, are offset by the group's poor profitability in recent years and high underwriting leverage,
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Date:Jun 21, 1993
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