A.M. Best Places Ratings of Delphi Financial Group, Inc. and Its Subsidiaries Under Review with Positive Implications
December 22 2011 - 3:03PM
Business Wire
A.M. Best Co. has placed under review with positive
implications the financial strength rating (FSR) of A (Excellent)
and issuer credit ratings (ICR) of “a” of Reliance Standard Life
Insurance Company (Chicago, IL) and First Reliance Standard
Life Insurance Company (New York, NY), the primary life/health
insurance subsidiaries of Delphi Financial Group, Inc. (DFG)
(NYSE: DFG). Concurrently, the financial strength rating of A
(Excellent) and issuer credit ratings of “a” have been placed under
review with positive implications for Safety National Group,
whose members include Safety National Casualty Corporation
(St Louis, MO) and its reinsured affiliate, Safety First
Insurance Company (Chicago, IL), the primary property/casualty
subsidiaries of DFG. Additionally, A.M. Best has placed
under review with positive implications the ICR of “bbb” and the
existing debt ratings of DFG. (See below for a detailed listing of
the debt ratings.)
The under review status follows yesterday’s announcement that
Tokio Marine Holdings, Inc. (TMHD) (Japan) and DFG have
entered into a definitive agreement under which TMHD will acquire
all outstanding shares of DFG. If consummated, the transaction will
be effected through TMHD’s wholly owned subsidiary, Tokio Marine
& Nichido Fire Insurance Co., Ltd (TMNF) (Japan),
which currently holds a FSR of A++ (Superior) and an ICR of “aa+”
from A.M. Best.
The total transaction value is approximately $2.7 billion and is
expected to close in the second quarter of 2012, subject to U.S.
and Japanese regulatory approvals. Upon closing, A.M. Best
anticipates that DFG and its subsidiaries will continue to operate
autonomously with no significant changes to its management team or
business model. Core product offerings of DFG include group
employee benefits, asset accumulation and excess workers’
compensation products, along with integrated disability and absence
management services offered through its noninsurance subsidiary,
Matrix Absence Management, Inc.
The transaction is consistent with TMHD’s strategy of expanding
its geographic footprint internationally and lends diversification
to its predominately property/casualty operating profile. DFG is
expected to benefit from improved financial flexibility associated
with TMHD, which is the oldest and largest property/casualty
insurer in Japan, having written approximately $30 billion in
consolidated net premiums in 2010.
While the transaction remains subject to execution risk, TMHD
has demonstrated expertise in completing significant transactions
in the United States, having acquired Philadelphia Consolidated
Holding Corp and its subsidiaries in 2009 and, most recently,
the remaining 50% of First Insurance Company of Hawaii, Ltd.
and its subsidiaries. Post-closing, A.M. Best believes it is
likely that DFG’s ICRs and debt ratings will be upgraded at least
one notch. Conversely, failure to successfully consummate the
transaction is likely to result in DFG’s ratings being removed from
under review and reassessed based on their current stand-alone
assessments.
The ratings of TMNF remain unchanged. A.M. Best is of the
opinion that the capitalization of TMNF is strong enough to absorb
the DFG acquisition at the level of its current ratings.
The following debt ratings have been placed under review with
positive implications:
Delphi Financial Group, Inc.—-- “bbb” on $250 million
7.875% senior unsecured notes, due 2020-- “bb+” on $175 million
fixed/floating rate junior subordinated debentures, due 2037
The following indicative shelf ratings have been placed under
review with positive implications:
Delphi Financial Group, Inc.—-- “bbb” on senior unsecured
debt-- “bbb-” on subordinated debt-- “bb+” on preferred stock
The principal methodology used in determining these ratings is
Best’s Credit Rating Methodology -- Global Life and Non-Life
Insurance Edition, which provides a comprehensive explanation of
A.M. Best’s rating process and highlights the different rating
criteria employed. Additional key criteria utilized include: “Risk
Management and the Rating Process for Insurance Companies”;
“Assessing Country Risk”; and “Rating Members of Insurance Groups.”
Methodologies can be found at
www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and
most authoritative insurance rating and information source. For
more information, visit www.ambest.com.
Copyright © 2011 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
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