CHICAGO, May 26 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
taken several actions regarding the ratings of Fremont General Corporation
(Fremont). The actions include lowering Fremont's senior debt rating to 'BB+'
(Double-B-Plus) from 'BBB-' (Triple-B-Minus) and the preferred securities of
Fremont's subsidiary Fremont General Financing I to 'BB' (Double-B) from 'BB+'
(Double-B-Plus). Also, Fremont Compensation Insurance Group's claims paying
ability rating is lowered to 'BBB+' (Triple-B-Plus) and the short-term claims
paying ability rating is lowered to 'D-2' (D-Two) from 'D-1-' (D-One-Minus).
The claims paying ability rating is now below the minimum threshold for DCR's
insurer solvency seal. The Rating Outlook is Negative.
The rating action is based on continuing unfavorable performance by
Fremont's property/casualty insurance operations in the first quarter of 2000
and the uncertainty that recent adverse reserve development trends have not
abated and will continue to hinder near-term profitability.
Fremont reported net income of $9.5 million in the first quarter of 2000,
compared with $34.3 million for the same period in 1999. Earnings for the
period were attributable to the company's financial services operations as
property/casualty earnings were modest and the combined ratio reported for the
period was 111.7 percent.
Fremont reported a net loss of $65.4 million for full year 1999, compared
with net income of $133.0 million in 1998. This deterioration was mainly
attributable to a fourth quarter 1999 charge of $48.8 million related to an
agreement to settle all obligations under a reinsurance agreement with
Reliance Insurance Company that was in effect for 1998 and 1999, as well as a
third quarter after-tax charge of approximately $100 million. Approximately
$75 million of this latter charge was related to adverse net reserve
development on workers' compensation business written in 1998 and 1999, with
the remainder related to reserve development in discontinued lines, which are
mainly assumed reinsurance businesses.
Fremont continues to face some uncertainty regarding future operating
performance and reserve development trends. Underwriting experience in the
overall workers' compensation market has been poor in recent years due to
competitive pricing and rising claim severity. While it appears that premium
rates are now increasing significantly, it is unclear whether these increases
are sustainable and sufficient to return profitability to adequate levels.
Fremont is a California-based holding company with subsidiaries engaged in
workers' compensation insurance and financial services that include commercial
and residential real estate lending, participating in syndicated bank loans,
and insurance premium financing. The company reported assets of approximately
$8.1 billion and shareholders' equity of $742 million at March 31, 2000.
Fremont is the 8th-largest provider of workers' compensation insurance in the
United States based on 1998 direct written premium.
For additional information, visit DCR's Web site at http://www.dcrco.com
(Quick Search: Fremont). DCR's research is also available on Bloomberg at
DCR, First Call's BondCall Direct/Research Direct at
http://www.firstcall.com and Multex at http://www.multex.com, as well as
through other third-party providers.
Fremont General Corporation
DCR Ratings
Company New Rating Prior Rating
Fremont General Corporation
Senior Debt 'BB+' 'BBB-'
(Double-B-Plus) (Triple-B-Minus)
Fremont General Financing I
Preferred Stock 'BB' 'BB+'
(Double-B) (Double-B-Plus)
Fremont Indemnity Co.
Claims Paying Ability 'BBB+' 'A-'
(Triple-B-Plus) (Single-A-Minus)
Short-Term Claims
Paying Ability 'D-2' 'D-1-'
(D-Two) (D-One-Minus)
Fremont Compensation Ins. Co.
Claims Paying Ability 'BBB+' 'A-'
(Triple-B-Plus) (Single-A-Minus)
Short-Term Claims
Paying Ability 'D-2' 'D-1-'
(D-Two) (D-One-Minus)
Fremont Casualty Insurance Co.
Claims Paying Ability 'BBB+' 'A-'
(Triple-B-Plus) (Single-A-Minus)
Short-Term Claims
Paying Ability 'D-2' 'D-1-'
(D-Two) (D-One-Minus)
Fremont Industrial Indemnity Co.
Claims Paying Ability 'BBB+' 'A-'
(Triple-B-Plus) (Single-A-Minus)
Short-Term Claims
Paying Ability 'D-2' 'D-1-'
(D-Two) (D-One-Minus)
Fremont Indemnity Co. of the Northwest
Claims Paying Ability 'BBB+' 'A-'
(Triple-B-Plus) (Single-A-Minus)
Short-Term Claims
Paying Ability 'D-2' 'D-1-'
(D-Two) (D-One-Minus)
Fremont Employers Insurance Co.
Claims Paying Ability 'BBB+' 'A-'
(Triple-B-Plus) (Single-A-Minus)
Short-Term Claims
Paying Ability 'D-2' 'D-1-'
(D-Two) (D-One-Minus)
Fremont Pacific Insurance Co.
Claims Paying Ability 'BBB+' 'A-'
(Triple-B-Plus) (Single-A-Minus)
Short-Term Claims
Paying Ability 'D-2' 'D-1-'
(D-Two) (D-One-Minus)
SOURCE Duff & Phelps Credit Rating Co.
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Related links:
http://www.dcrco.com
CONTACT:
James B. Auden, CFA, 312-368-3146,
auden@dcrco.com, or Donald F. Thorpe, CFA, 312-606-2353,
thorpe@dcrco.com, both of DCR
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