A.M. Best announced that it has downgraded the financial strength rating of the Highlands Insurance Group of Lawrenceville New Jersey from ‘B’ (Fair) to ‘C’ (Weak), reflecting its “weak capitalization, poor operating performance, regulatory constraints and significant near-term debt servicing requirements at its parent.”
Highlands reported a net 3rd quarter loss of $30.5 million, and nine month losses totaling $65 million. It reached an agreement with its creditor banks last week “to waive certain events of default” for the 4th quarter. Its CEO, CFO and a board member resigned earlier this month (See IJ Website Nov.8).
Best’s announcement noted that Highland’s surplus base has declined by 51 percent since 1998, and that its “on-going operating losses have regularly triggered certain financial covenants of the bank agreement.” The waiver of enforcement of these provisions by Highlands lenders is conditioned upon restructuring its capital.
The bank debt falls due in April next year, and Best found that “the group’s available cash falls well short of the $49 million needed to pay off the bank debt at its maturity.”|”a.m., best, downgrades, highlands, group
Topics AM Best
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