A.M. Best Affirms Ratings of Allmerica; Assigns Issuer Credit Ratings and Upgrades Debt Ratings
04 Maggio 2005 - 9:17PM
Business Wire
A.M. Best Co. has affirmed the financial strength rating of A-
(Excellent) of the publicly-traded holding company, Allmerica
Financial Corporation's (Allmerica) (NYSE:AFC) (Worcester, MA)
property/casualty subsidiaries. Additionally, A.M. Best has
affirmed the financial strength rating of B+ (Very Good) of
Allmerica's life insurance companies. Concurrently, A.M. Best has
upgraded the debt ratings to "bbb-" from "bb+" for Allmerica's
senior debt and to "bb" from "bb-" for its capital securities. The
debt rating of "AMB-3" on the commercial paper has been withdrawn,
reflective of its inactive status. A.M. Best has also assigned
issuer credit ratings (ICRs) of "a-" to Allmerica's
property/casualty subsidiaries, "bbb-" to the life insurance
companies and a "bbb-" to Allmerica. All ratings have a stable
outlook. The financial strength rating of Allmerica's
property/casualty subsidiaries reflects sound capitalization,
stemming from improved operating earnings and the elimination of
dividends paid to the parent, Allmerica, to support the life
companies. Additionally, the rating recognizes the group's well
balanced business composition and geographic diversification, while
benefiting from having two well-established regional organizations
with long-standing agency relationships and a strong regional
market presence. Partially offsetting these factors is the group's
elevated, albeit improved underwriting leverage, primarily
attributable to dividends paid to Allmerica between 1999 and 2002,
which significantly reduced surplus. However, A.M. Best anticipates
Allmerica will produce favorable operating earnings and believes
its underwriting leverage and capitalization will further improve.
The rating of Allmerica's life operations reflects their improved
capitalization, despite recent dividends, adequate operating
performance and measures to lower the overall risk profile. The
life insurance companies have performed to A.M. Best's expectations
as they continue to manage the remaining large block of inforce
business, which is in run off and is primarily comprised of
variable annuities. The upgrading of Allmerica's debt ratings
reflects its improved financial leverage and financial flexibility
at the holding company since 2003. Allmerica maintains moderate
financial leverage with sufficient assets and the recent dividends
from the life companies to fund fixed obligations in the near term.
A.M. Best expects the cash flows generated from the run off of the
life business will be the primary source to fund holding company
obligations in the intermediate-term. For a complete list of
Allmerica Financial Corporation's financial strength, issuer credit
and debt ratings, please visit
http://www.ambest.com/press/050401allmerica.pdf. For Best's Debt
Ratings, all other Best's Ratings, an overview of the rating
process and rating methodologies, please visit
http://www.ambest.com/ratings. A.M. Best Co., established in 1899,
is the world's oldest and most authoritative insurance rating and
information source. For more information, visit A.M. Best's Web
site at http://www.ambest.com.
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