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S&P Rating for 20th Century Insurance Units Lowered Again

June 11, 1994|THOMAS S. MULLIGAN | TIMES STAFF WRITER

Standard & Poor's on Friday again lowered its rating of the claims-paying ability of 20th Century Industries' two insurance units, citing their earthquake-depleted surplus. Another major rating firm, A.M. Best, said it plans to take similar action Monday.

A downgrade can hurt a company's sales or its ability to raise money from investors or lenders, but analysts were doubtful whether Friday's action will have much impact on 20th Century.

"We're hearing the rifle shot after the bullet has passed," one California insurance industry insider said, explaining that 20th Century has already taken action to improve its condition.

On Thursday, 20th Century announced an agreement with the state Insurance Department under which it has stopped selling new homeowners and earthquake insurance and will phase out its existing residential business over the next two years.

The insurer's 90,000 earthquake policyholders must find new coverage by their next annual renewal date. The 240,000 homeowners policyholders will be entitled to two more renewals.

Friday's downgrade was the third the Woodland Hills-based insurer has received from S&P since the Jan. 17 Northridge earthquake, which cost it an estimated $600 million in claims and wiped out two-thirds of its surplus, or cushion against losses.

S&P dropped the rating to B from BB. Both ratings are within the "vulnerable" range. The new rating applies to 20th Century Insurance Co. and its sister, 21st Century Casualty Co.

S&P said that although the withdrawal improves 20th Century's financial outlook, the company remains vulnerable to another earthquake during the next year as its current policies expire.

A.M. Best said that on Monday it will cut 20th Century's rating by two notches, to B+ from A-. The new rating is the lowest of six "financially secure" categories.

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