DUFF & PHELPS: PROVIDENT LIFE & ACCIDENT INSURANCE COMPANY CLAIMS PAYING ABILITY RATING DOWNGRADED TO 'AA' FROM 'AA+'
CHICAGO, Nov. 5 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has lowered the claims paying ability rating of Provident Life & Accident Insurance Company (NYSE: PVB) (Provident) and its wholly owned subsidiary, Provident National Assurance Company (PNAC), to 'AA' (Double-A) from 'AA+' (Double-A-Plus). This rating action is based on the company's continued loss experience in the individual disability income insurance segment which culminated in a special after-tax charge of $275 million ($6.09 per share) to third quarter earnings. Provident is the primary life insurance subsidiary, and ultimately a wholly owned subsidiary of Provident Life & Accident Insurance Company of America (PVB), a publicly held holding company traded on the NYSE. PVB reported GAAP assets of $16.9 billion and stockholders' equity of $1.3 billion at Sept. 30, 1993. The company's operations are divided into four segments: group employee benefits, group pension, group and individual disability, and individual life. Provident is one of the largest writers of non-cancelable individual disability income insurance in the U.S., and this is a growing business line for the company. Disability business written in recent underwriting years is meeting profitability objectives, but a block of business written during the period 1983-88 has produced large losses due to inadequate pricing as reflected in adverse morbidity experience. The special charge taken in the third quarter reflects an adjustment of management's estimate of the present value of losses on this underperforming block of disability business after changes in morbidity and interest rate assumptions. Provident has taken a number of corrective measures to protect against future losses and improve the long-run viability of its disability income business, including: tightening underwriting and pricing standards, exiting unprofitable geographic areas, and changing claims management practices. -0- 11/5/93 /CONTACT: James B. Auden, CFA of Duff & Phelps Credit Rating Co., 312-368-3146/ (PVB)
CO: Provident Life & Accident Insurance Company ST: Illinois IN: INS SU: RTG
TM -- NY065 -- 1378 11/05/93 16:42 EST
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|Date:||Nov 5, 1993|
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