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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - NOVEMBER 01, 2002 12:00 AM (EST)
A.M. Best Co. has lowered the financial strength rating to B (Fair) from B+ (Very Good) of American Founders Life Insurance Company (Dallas, TX). Additionally, A.M. Best has lowered the financial strength rating to B- (Fair) from B (Fair) of States General Life Insurance Company (Fort Worth, TX). Both ratings have been assigned a negative outlook. Both companies are life insurance subsidiaries of the property-casualty insurer, Vesta Insurance Group (Delaware) [NYSE: VTA]. These rating actions do not affect the ratings of Vesta Fire Insurance Corporation or its affiliated property and casualty insurers.
The rating of American Founders reflects the company's significant exposure to non-performing collateral loans in Mexico and its impact on the risk-adjusted capitalization. The combination of the company's sizeable non-performing collateral loan portfolio, single large investment in a limited liability corporation and increased exposure to interest-sensitive annuity business have reduced the company's overall risk-adjusted capitalization significantly below the minimum level relative to American Founders' operating profile.
The rating of States General reflects its continuing negative statutory operating performance and reduction in statutory capital and surplus position. States General continues to experience unfavorable operating results in its existing block of individual major medical business. Despite a capital contribution by Vesta Insurance Group in 2001, the company's absolute and risk-adjusted capitalization remains significantly below the minimum level relative to the company's insurance and investment risks.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.