CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 04, 2009 12:00 AM (EDT)
A.M. Best Co.has placed the financial strength rating of B++ (Good) and issuer credit ratings (ICR) of "bbb" of Prime Insurance Group (Prime) (Sandy, UT) and its members, Prime Insurance Company and Prime Insurance Syndicate, Inc. (both of Illinois), under review with negative implications.
These rating actions are in response to the excessive financial leverage at the parent company, Prime Holdings Insurance Services, Inc. (parent), and the uncertainty related to the parent's ability to raise capital, which is currently underway. The under review status also considers the inherent risk in any major transaction as respects to change in controlling ownership.
The parent's high financial leverage stems from its offer to existing shareholders to redeem $18 million of common equity combined with the additional debt taken on by the parent to finance this program. Dividends from members of Prime are the parent's primary source of funding. As of first quarter 2009, the parent's adjusted debt-to-total capital was 73.6%—a level in excess of A.M. Best's notching guidelines, which should be no greater than 65% to support the ICR assigned to Prime.
On a positive note, Prime's statutory capitalization is strong and operating performance continues to be very good.
The ratings will remain under review pending A.M. Best's review and further discussions with management relating to the parent's capital raising initiative.
For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.