A.M. Best Downgrades and Removes From Under Review Ratings of Prime Insurance Group and Its Members; Assigns Negative Outlook

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has downgraded the financial strength rating to B+ (Good) from B++ (Good) and the issuer credit ratings to “bbb-” from “bbb” of Prime Insurance Group (Prime) (Sandy, UT) and its members, Prime Insurance Company and Prime Insurance Syndicate, Inc. (both domiciled in Chicago, IL). The ratings have been removed from under review with negative implications and assigned a negative outlook.

These rating actions are in response to the continued excessive financial leverage at the parent company, Prime Holdings Insurance Services, Inc., and the ongoing uncertainty related to the parent’s ability to raise capital. The negative outlook considers the inherent risk in any major transaction as respects to a possible 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 third quarter 2009, the parent’s adjusted debt-to-total capital was 67.3%—a level in excess of A.M. Best’s notching guidelines—given the parent’s limited equity.

On a positive note, Prime’s statutory capitalization is strong, and operating performance continues to be very good.

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/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. For more information, visit www.ambest.com.

A.M. Best Co.
Analysts
Daniel Ryan, 908-439-2200, ext. 5325
daniel.ryan@ambest.com
or
Joseph Roethel, 908-439-2200, ext. 5630
joseph.roethel@ambest.com
or
Public Relations
Jim Peavy,908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow,908-439-2200, ext. 5378
rachelle.morrow@ambest.com

Source: A.M. Best Co.