Business Editors
CHICAGO--(BUSINESS WIRE)--Dec. 15, 2000--Fitch has affirmed and
removed from Rating Watch Negative the `A+' insurer financial strength
(IFS) ratings of Trustmark Insurance Company (Trustmark) and its
wholly owned subsidiary, Trustmark Life Insurance Company. Fitch rates
these companies on a combined basis given their shared senior
management, investment management and brand identification. The Rating
Outlook is Stable.
Fitch placed Trustmark's ratings on Rating Watch Negative in
February 2000 following discussions with management regarding adverse
developments among a number of contracts within the company's
reinsurance business. Since that time, Fitch has concluded that the
capital impact of the actual after-tax charge necessary to cover
potential losses associated with these contracts is not sufficient to
warrant a downgrade of the company's rating. In addition, management
has made substantial progress in returning the company to historical
profitability levels following uncharacteristically poor performance
in 1999.
Fitch's ratings on Trustmark have been based in part on the fact
that, despite inherent volatility in the health insurance industry,
the company has been able to produce very consistent operating
results. However, this track record was disrupted in 1999 by a
substantial operating loss triggered primarily by the company's
underestimation of medical cost trends. Today's reaffirmation reflects
Fitch's recognition that operating performance has improved
considerably in the first nine months of 2000 in response to the
company's corrective rate actions and product structure adjustments.
Today's rating action reflects Fitch's expectation that Trustmark
will continue to make progress in improving operating performance to
historical levels. In addition, Fitch anticipates that Trustmark's
risk based capital (RBC) ratio will not decline below 200% of the
company action level, and that there will be no adverse development in
the company's reinsurance contracts beyond that for which the company
intends to reserve in the fourth quarter of 2000.
Trustmark's ratings are supported by the company's strong track
record of delivering profitable results, good balance sheet
fundamentals, excellent administrative capabilities and solid
management team. These positives are somewhat offset by an inherently
high level of risk in the health insurance industry, particularly with
respect to the escalating cost of providing care and regulatory and
legal issues which may impact Trustmark's ability to appropriately
price its products and manage its costs.
Lake Forest, Ill.-based Trustmark provides a variety of insurance
products, including medical, dental, life, annuity and administrative
and consulting services to the group, worksite and individual markets.
However, the company is primarily a medical insurer with approximately
two-thirds of 1999 revenue drawn from its medical insurance
operations.
CONTACT:
mw/mi*
CONTACTS: Fitch, Chicago
Bradley S. Ellis 1-312-368-2089
or Douglas L. Meyer, CFA 1 312-368-2061
Original article: http://www.businesswire.com/webbox/bw.121500/203502215.htm
