SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 29, 1999
ACCEPTANCE INSURANCE COMPANIES INC.
(Exact name of registrant as specified in its charter)
Delaware 1-7461 31-0742926
(State of Incorporation) (Commission File Number) (IRS Employer Identification
Number)
222 S. 15th Street, Suite 600 North
Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
(402) 344-8800
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events.
On November 29, 1999, A.M. Best Co. issued a press release announcing
that it had revised the rating of Acceptance Insurance Companies Inc. (the
"Registrant") from "A-" (Excellent) to "B++" (Very Good). The rating also
applies to the Registrant's five insurance operating subsidiaries.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
ACCEPTANCE INSURANCE COMPANIES INC.
By /s/ Kenneth C. Coon
Kenneth C. Coon, Chief Executive Officer
December 3, 1999
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Exhibits:
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99.1
EXHIBIT 99.1
OLDWICK, NJ Nov. 29 (BestWire)-A.M. Best Co. has downgraded Acceptance
Insurance Cos., Omaha, Neb., to B++ from A-. The group rating also applies to
the company's five insurance operating subsidiaries.
The rating action follows Acceptance's third-quarter reserve strengthening of
$44 million, which is supported by the group's external actuary and moves its
reserve position to the high end of the actuarial range. Also affecting the
rating are the group's nonrecurring expenses and charges that were recorded in
the third quarter; which are attributable to the group's restructuring
initiatives and an unprecedented demand for crop insurance.
The downgrade reflects the group's poor operating results, significant reliance
on reinsurance and continued volatility in reserve trends. In addition, the
group's capitalization and earnings are increasingly dependent upon a
disproportionate share of surplus and earnings of its subsidiary, American
Growers. Although the financial results and capital strength of America
Growers haven't yet been adversely impacted by the group's difficulties, the
downgrade reflects the group's dependence on the subsidiary and the potential
strain the group could place on the company.
A.M. Best will continue to monitor the group's results and its restructuring
initiatives to ensure that operating performance, financial condition and
stability of operations remain commensurate with the current rating level.
In recent years, the group's operating results have been supported largely by
its crop business; however, the profit margin on this business has declined in
the past two years. This decline, combined with an adverse experience in its
program business, has allowed operating results to continue to deteriorate. In
recognition of these issues, individual unprofitable books of business and
personal automobile lines were eliminated. This restructuring, announced at
year-end 1998, reduced gross written premiums by about 21%. However, during
1999, a portion of its historically profitable book of business experienced an
increase in previously unreported claims. This accounted for most of the recent
reserve strengthening.
A.M. Best believes the company's expense ratio will be difficult to control as
it continues to retrench. Management will also be challenged to maintain
capital strength and a conservative reserving posture as discontinued
operations are run off. The company continues to explore alternatives for
maximizing shareholder value, which may include the sale of all, or parts, of
the group.
The rating is based on the consolidated financials of the five subsidiaries of
Acceptance Insurance Cos. The group rating is assigned to Acceptance Insurance
Co., Acceptance Indemnity Insurance Co., Redland Insurance Co. and Acceptance
Casualty Insurance Co., based on their inter-company pooling agreement. The
pool underwrites specialty property/casualty insurance and targets niche
markets and programs throughout the United States. The fifth company, American
Growers, is a specialty crop insurer and constitutes a separate rating unit.
