A.M. Best Co. announced that it has placed the ‘A’ (Excellent) financial strength ratings of Worldwide Direct Auto Insurance Company and Worldwide Insurance Company of Cincinnati, OH, under review with negative implications, following the announcement that Connecticut’s Response Insurance Group of Companies, a subsidiary of Direct Response Corp, had signed a stock purchase agreement to acquire them from Great American Insurance Company. (See IJ Website Jan. 27)
Great American is an insurance subsidiary of American Financial Group, Inc. (AFG), and has indicated that it plans to sell the two companies for an amount equal to the policyholders’ surplus of the Worldwide companies plus $17 million. Best noted that “The transaction will require the filing of a ‘Form A’ application and approval from the Ohio Department of Insurance,” and that the acquisition “is being conducted through Warner Insurance Company (Meriden, CT), a subsidiary of Direct Response Corp.”
It also stated that “In addition, Response will acquire Great American’s right to renew certain of its personal automobile insurance business written on a direct basis in selected markets. Response will pay commissions to Great American based on the successful renewal into Response of the Great American policies written on a direct basis. AFG does not expect to report a significant gain or loss on the sale.”
“The negative implications reflect the likely downgrade or withdrawal of Worldwide Insurance and Worldwide Direct Auto’s current ratings, due to future uncertainties with regard to business persistency, operational changes and their role in the Response Insurance Group,” said Best. “The ratings will remain under review pending receipt of the necessary regulatory approvals, meeting with the new management and the close of the transaction, which is expected in the second quarter of 2003.”
Best’s announcement also noted that “The current financial strength ratings of Great American Insurance Company and Warner Insurance Company, A (Excellent) and B++ (Very Good), respectively, remain unaffected by this transaction.”
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