CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - DECEMBER 08, 2006 12:00 AM (EST)
A.M. Best Co. has downgraded the financial strength rating (FSR) to A+ (Superior) from A++ (Superior) and the issuer credit ratings (ICR) to "aa-" from "aa+" for Alfa Insurance Group (Alfa) and its members. Concurrently, A.M. Best has downgraded the ICR and debt ratings to "a" from "aa-" of Alfa Corporation [NASDAQ/NM: ALFA]. The outlook for the above ratings is revised to stable from negative. A.M. Best has also downgraded the debt rating to AMB-1 from AMB-1+ on the commercial paper program of Alfa Corporation.
Additionally, A.M. Best has affirmed the FSR of A+ (Superior) and the ICR of "aa-" of Alfa Life Insurance Corporation (Alfa Life). The outlook for these ratings remains stable. All companies are domiciled in Montgomery, AL. (See below for a detailed list of the ratings.)
The FSR of Alfa reflects its strong capitalization, long-term operating performance and sustainable competitive advantage. These factors are derived from management's conservative operating philosophy, exceptional customer service and the group's firmly entrenched personal lines market position in Alabama.
The FSR also reflects the recent decline in underwriting performance within its core lines of business, competitive market conditions and Alfa's ongoing, albeit reduced, susceptibility to severe weather related events due to its significant geographic presence in the Gulf Coast, all of which are inconsistent with A.M. Best's expectations for its highest rating level.
Alfa Mutual Insurance Company, Alfa Mutual Fire Insurance Company and Alfa Mutual General Insurance Company (Alfa Mutual Group) collectively maintain approximately 55% majority ownership of Alfa Corporation and have unconditionally guaranteed all of Alfa Corporation's outstanding commercial paper and long-term debt.
The ratings of Alfa Life reflect its integral role as a member of the Alfa group and its steadily increasing new business production enhanced by effective cross-selling strategies within the organization, coupled with strong sales of its term life and universal life products.
Additionally, the ratings reflect Alfa Life's profitable operating performance, strong stand-alone risk-adjusted capitalization and strategies to increase premium income outside Alabama, which somewhat mitigates A.M. Best's concerns regarding Alfa Life's narrow geographic profile and its heavy reliance on its affiliated property/casualty employee agent field force.
The FSR has been downgraded to A+ (Superior) from A++ (Superior) and the ICRs to "aa-" from "aa+" for Alfa Insurance Group and its following subsidiaries:
- Alfa General Insurance Corporation
- Alfa Insurance Corporation
- Alfa Vision Insurance Corporation
- Alfa Mutual Insurance Company
- Alfa Mutual Fire Insurance Company
- Alfa Mutual General Insurance Company
- Alfa Specialty Insurance Corporation
- Virginia Mutual Insurance Company
The ICR has been downgraded to "a" from "aa-" for Alfa Corporation.
The following debt ratings have been downgraded:
Alfa Corporation—
- to "a" from "aa-" on $70 million senior floating rate notes, due 2017
- to AMB-1 from AMB-1+ on commercial paper program
The FSR of A+ (Superior) and the ICR of "aa-" have been affirmed for Alfa Life Insurance Corporation.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.