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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - OCTOBER 15, 2002 12:00 AM (EDT)
A.M. Best Co. has placed the financial strength ratings of B (Fair) of Bankers Insurance Group, Incorporated's (Bankers) subsidiaries (St. Petersburg, FL) under review. (See listing below.)
These rating actions reflect the continued deterioration in capital along with the elevated financial leverage of the holding company. As a result, Bankers has signed a definitive agreement with Fidelity National Financial [NYSE: FNF] regarding the sale of Bankers' servicing rights to the National Flood Insurance Program as well as First Community Insurance Company. This transaction involving these assets reflects Bankers ongoing capital raising initiatives in response to continued deterioration in statutory surplus. Proceeds from the transaction will be used to pay down existing holding company debt and to restore the statutory surplus position of the remaining Bankers' entities.
The ratings for Bankers' subsidiaries (with the exception of First Community) are being placed under review with negative implications in consideration of their deteriorated capital positions due to changes in non-admitted assets and operating losses, including unrealized losses on affiliated investments. While the transaction is expected to replenish and may stabilize the capital position of Bankers' entities, the loss of risk-free income associated with the flood servicing business could potentially further strain future long-term operating results. In the absence of capital infusions and stabilization in results, a downgrading of the ratings would occur.
The under review status of First Community includes developing implications, indicating uncertainty regarding its future role as a risk bearing insurance entity and as a writer of flood business that is fully reinsured via the National Flood Insurance Program. Historically, as its stand-alone capitalization has been adequate, First Community's rating has been constrained by the elevated financial leverage of both its immediate and ultimate holding company.
The ratings will remain under review pending the close of the transaction, expected during the fourth-quarter of 2002, as well as meetings with management.
The financial strength ratings of B (Fair) have been placed under review with negative implications for the following subsidiaries of Bankers Insurance Group, Incorporated:
- Bankers Insurance Group
- Bankers Insurance Company
- Bankers Security Insurance Company
- Bankers Life Insurance Company
The financial strength rating of B (Fair) has been placed under review with developing implications for the following subsidiary of Bankers Insurance Group, Incorporated:
- First Community Insurance Company
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.