Ratings Agencies All Cut Kemper

March 5, 2003

On news of Kemper Insurance Cos. $312 million net loss in 2002, Fitch, Standard & Poor’s and Moody’s all lowered the company’s ratings.

Kemper announced it has sold its middle-market lines of business to a private equity investment firm affiliated with Swiss Re. The new firm will retain the name Kemper and many of Kemper’s management staffers.

Fitch Ratings has downgraded the insurer financial strength ratings of three primary insurance underwriters of the Kemper Insurance Companies (KIC) to “CC” from “B+.” Additionally, Fitch has downgraded the $700 million of surplus notes issued by group member Lumbermens Mutual Casualty Company (Lumbermens) to “C” from “CCC.” All ratings have been removed from Rating Watch Negative.

Meanwhile, Standard & Poor’s Ratings Services said today that it lowered its counterparty credit and financial strength ratings on the members of the Kemper Insurance Cos. Intercompany Pool to “B+” from “BB+.” The ratings remain on CreditWatch with negative implications, where they were placed on Feb. 18, 2003.

At the same time, Standard & Poor’s said its “CCC” rating on Lumbermens Mutual Casualty Co. (Lumbermens) surplus notes remains on CreditWatch with negative implications.

Moody’s Investors Service has downgraded its insurance financial strength ratings of members of The Kemper Insurance Companies inter-company pool to “B3” from “Ba2.”

In the same action, Moody’s downgraded the ratings of surplus notes issued by Lumbermens Mutual Casualty Company, the lead company of Kemper’s inter-company pool, to “Ca” from “Caa1” following the company’s announcement that it intends to enter into a renewal rights transaction with a new company, which is being capitalized by private equity funds managed by Securitas Capital, LLC; The Cypress Group L.L.C.; Gilbert Global Equity Partners; and some members of Kemper’s existing management team.

The renewal rights transaction will include Kemper’s core middle market and small business accounts as well as certain other lines of business.

The outlook for these ratings is negative.

Topics Agencies

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