MOODY'S REVIEWS RATINGS OF SAFECO CORPORATION AND SUBSIDIARIES FOR POSSIBLE DOWNGRADE, SENIOR DEBT AT Aa3; CHANGES DIRECTION OF REVIEW ON AMERICAN STATES' INSURANCE FINANCIAL STRENGTH RATINGS TO POSSIBLE DOWNGRADE FROM DIRECTION UNCERTAIN
New York, 6/9/1997 -- Moody's Investors Service has placed the ratings of SAFECO Corporation and its subsidiaries under review for possible downgrade (SAFECO Corporation senior debt at Aa3, Prime-1 rating for commercial paper), following the company's announcement that it has signed a definitive agreement with American States Financial Corporation to acquire American States and its property/casualty insurance affiliates from Lincoln National Corporation -- which owns 83.3% of American States' outstanding common stock -- in a leveraged transaction that is valued at approximately $2.8 billion. Moody's also changed the direction of review for American States' Aa3 insurance financial strength ratings to possible downgrade, from direction uncertain.
According to Moody's, these rating reviews will focus on the strategic rationale of the American States acquisition for SAFECO -- including consideration of enhanced geographic diversification, agency distribution, the prospective market position of the group's personal and commercial lines segments, and the potential for revenue and cost savings -- as well as on SAFECO Corporation's proposed financing structure and prospective leverage appetite. The rating agency added that the combined insurance operations' cumulative natural catastrophe underwriting exposures would also be reviewed. With respect SAFECO's credit operations, Moody's noted that its review would focus on its strategic role within the SAFECO organization, as well as on the credit operations' asset quality, competitive position, and funding strategy.
Ratings for SAFECO that have been placed on review for possible downgrade include the following:
SAFECO Corporation -- Senior long-term debt at Aa3;
SAFECO Credit Company -- Prime-1 rating for commercial paper and Aa3 medium term note program, both guaranteed by SAFECO Corporation;
SAFECO Property/Casualty Intercompany Pool (SAFECO Insurance Company of America, SAFECO Insurance Company of Illinois, SAFECO National Insurance Company, General Insurance Company of America, First National Insurance Company of America) -- Insurance Financial Strength Ratings at Aa1;
SAFECO Life Insurance Company - Insurance Financial Strength Rating at Aa2.
Ratings that were already under review, with direction uncertain, that have been changed to a review for possible downgrade, including the following:
American States Property/Casualty Intercompany Pool (American States Insurance Company, American States Preferred Insurance Company, American Economy Insurance Company, Insurance Company of Illinois) -- Insurance Financial Strength Ratings at Aa3.
SAFECO Corporation, based in Seattle, Washington, USA is engaged through its subsidiaries in property/casualty insurance, life and health insurance, surety, real estate investment and management, and commercial credit and asset management. As of March 31, 1997, SAFECO Corporation reported total assets of $20 billion and equity of $4.0 billion.
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