Acceptance to Receive $21.5 Million for Crop Insurance, S&P Lowers Ratings

Acceptance Insurance Companies Inc. (AICI) gave further details of its preliminary agreement with Rain and Hail L.L.C. and others, to sell its crop insurance assets. If the deal is concluded and approved by regulators, Acceptance will receive an initial payment at closing, expected in December, of $21.5 million.

It also indicated that it could be reimbursed certain expenses of approximately $5 million during 2003 and could receive additional payments of approximately $2.5 million “depending upon the amount of the Company’s crop insurance business transitioned to Rain and Hail.” It could also receive between zero and $7.5 million for the next five years “depending upon Rain and Hail’s achievement of certain financial results in each of those years.”

Standard & Poor’s reacted to AICI’s earnings announcement (See IJ Website Nov. 19) by lowering its counterparty credit rating to ‘CC’ from ‘CCC’ following the revelation that it “had incurred an estimated after-tax loss of $131 million for its third quarter ending Sept. 30, 2002.”

S&P also said that it lowered its counterparty credit and financial strength ratings on American Growers Insurance Co. (AGIC) to ‘CC’ from ‘BB-‘, and that it was keeping the companies on CreditWatch with negative implications.

The rating agency’s bulletin noted that “AICI’s $131 million third-quarter loss included a previously reported loss of $62.2 million from crop insurance and underwriting operations. The losses, together with previous, much smaller losses reported earlier in the year, have eliminated most of the capital at both AICI and AGIC.”

Topics Agribusiness