[February 22, 2013]

A.M. Best Requests Comments on Draft Criteria: Analyzing Insurance Holding Company Liquidity

A.M. Best Co. is requesting comments from market participants in the insurance industry and other interested parties on the draft criteria report, "Analyzing Insurance Holding Company Liquidity" (updates version formerly entitled, "Analyzing Commercial Paper Programs" dated January 13, 2012).

This update expands upon and replaces the criteria, "Analyzing Commercial Paper Programs" and describes how A.M. Best's analysts review current and projected sources and uses of cash for the holding company to evaluate its liquidity profile. An analysis of insurance holding company liquidity is an integral part of understanding potential stresses on an insurance operating company, because the key source of holding company liquidity is generally the dividends received from owned insurance operating companies. Holding companies possessing a good liquidity profile genrally are viewed more favorably by A.M. Best's analysts because of perceived improved financial flexibility. Diverse sources of funds, including the maintenance of assets identified as cash equivalents, will assist holding companies in meeting their operating needs, funding subsidiaries to support growth initiatives, meeting short-term debt obligations of both principal and interest expense and potentially returning cash to shareholders in the form of cash dividends and/or share repurchases.

These changes are part of A.M. Best's continual review of its rating methodology and are not considered material or expected to affect ratings.

Visit www.ambest.com/ratings/methodology to download a PDF copy of each report.

Written comments should be submitted by email to rating.methodology@ambest.com no later than March 22, 2013.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

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