S&P Lowers and Withdraws Worldwide Insurance Co. Ratings

June 11, 2003

Standard & Poor’s Ratings Services announced that it has lowered its counterparty credit and financial strength ratings on Worldwide Insurance Co. and its subsidiary, Worldwide Direct Auto Insurance Co. (collectively referred to as Worldwide), to ‘BB+’ from ‘A’ and has removed them from CreditWatch. It also said that it has subsequently withdrawn the ratings at Worldwide’s request.

“The companies were placed on CreditWatch on Jan. 28, 2003, following the announcement by American Financial Group (AFG), their ultimate parent at the time, that it had reached an agreement to sell Worldwide to Direct Response Corp. (Direct Response), a direct insurance writer based in Connecticut,” said S&P. “As a result of the sale, which was completed on April 25, 2003, Standard & Poor’s lowered the ratings on Worldwide to reflect the companies’ standalone characteristics. Previously, the ‘A’ ratings were reflective of the companies’ participation in a pooling arrangement with Great American Insurance Co., one of AFG’s main property/casualty insurance subsidiaries.”

S&P credit analyst Laline Carvalho stated: “Major factors reflected in the ratings include Worldwide’s modest standalone business position as a provider of direct auto coverage and about $70 million in premium writings, poor historical operating performance, and moderate integration risk related to its acquisition by Direct Response, which doubled in size following the acquisition.”

The bulletin noted, however, that “Partially offsetting these factors are the companies’ very strong estimated capital adequacy position following recent capital contributions by the new parent, expected expense improvements as a result of economies of scale related to Worldwide’s new position as a subsidiary of an insurance group dedicated selling through the direct channel, as well as expected improved loss experience as a result of recent restructuring and reunderwriting actions.”

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