A.M. Best Assigns Debt Rating to Selective Insurance Group's Senior Unsecured Notes

Strategic Insights -

A.M. Best Co. has assigned a debt rating of 'a-' to the forthcoming $100 million senior unsecured notes due 2035 to be issued by Selective Insurance Group Inc., a leading provider of insurance products and services in the small commercial lines business segment. The rating reflects Selective's solid capitalization, favorable operating performance, and strong regional market presence. The company plans to use approximately half of the net proceeds from the senior debt issuance to meet principal repayments on existing debt over the next three years.

Key Takeaways:

  • A.M. Best assigned a debt rating of 'a-' to Selective Insurance Group's $100 million senior unsecured notes due 2035, reflecting the company's solid capitalization, favorable operating performance, and strong regional market presence.
  • The company plans to use approximately half of the net proceeds from the senior debt issuance to meet principal repayments on existing debt over the next three years, demonstrating its commitment to debt reduction and financial discipline.
  • Selective's debt to total capital at Sept. 30, 2005, was 20.1%, down from 23.0% at year-end 2004 due to continued solid net income and debt reduction during the first nine months of the year.
  • The issuance of the $100 million of senior notes would increase the company's pro forma debt to total capital to 26.2% at Sept. 30, 2005, but adjusting for the nearly $50 million of proceeds from the offering that will be held in escrow for principal repayments, the company's pro forma debt to total capital at Sept. 30, 2005, was 23.3%.
  • A.M. Best is optimistic that Selective will be able to maintain stable financial leverage measures at the holding company in 2005 and 2006 based on the company's expected profitable operating performance and financial discipline.
  • The following debt ratings were unchanged: Selective Insurance Group Inc.'s 'a-' on $50 million 7.25% senior unsecured notes, due 2034; 'a-' on $305 million 1.6155% senior unsecured convertible notes, due 2032; and 'bbb+' on $25 million 8.75% subordinated convertible debentures, due 2008.
  • The financial strength rating of A+ (Superior) was unchanged for the intercompany pool members of Selective Insurance Group, Inc., including Selective Insurance Company of America, Selective Way Insurance Company, and six others.

Statistics:

  • Selective's debt to total capital at Sept. 30, 2005, was 20.1%, down from 23.0% at year-end 2004.
  • The company's pro forma debt to total capital at Sept. 30, 2005, would increase to 26.2% with the issuance of the $100 million of senior notes, but adjusting for the nearly $50 million of proceeds from the offering that will be held in escrow for principal repayments, the company's pro forma debt to total capital at Sept. 30, 2005, was 23.3%.
  • The $100 million senior unsecured notes due 2035 have a 6.70% coupon rate.
  • Selective's existing debt and financial strength ratings were unchanged, with a stable outlook.

Sources:

  • A.M. Best Co.
  • Selective Insurance Group Inc.
  • Nasdaq: SIGI
  • Comtex SmarTrend(SM)
  • Comtex News Network, Inc.
  • A.M. Best Company, Inc.