Business Wire - A.M. Best Places Ratings Under Review Following Mercury Finance’s Announcement of Planned Acquisition

OLDWICK, N.J.–(BUSINESS WIRE)–Jan. 13, 1997–Effective immediately, A.M. Best has placed the “A” rating of Admiral Life Insurance Company of America, Phoenix, Ariz.; the “A-” rating of Lyndon Property Insurance Co., St. Louis, Mo.; and the “B” ratings of Lyndon Life Insurance Co., St. Louis, and Gulfco Life Insurance Co., Marksville, La., under review with developing implications.

This rating action was taken because of the announcement by Mercury Finance Co., the parent of Lyndon Property Insurance, Lyndon Life Insurance and Gulfco Life Insurance, that it had signed a definitive agreement with BankBoston Corp. to acquire its consumer finance subsidiary, Fidelity Acceptance Corp., the parent of Admiral Life Insurance Co.

The agreement calls for Mercury Finance to issue 32,708,333 shares of its common stock to BankBoston and refinance nearly $700 million of debt issued by Fidelity Acceptance. The transaction is expected to close in the first quarter of 1997, pending regulatory approval. Upon completion of the transaction, BankBoston will maintain an approximately 16% equity interest in Mercury Finance. Management views this acquisition as an opportunity for branch growth, cross-selling opportunities and cost savings through certain consolidations within the combined consumer finance operations.

These consumer finance companies purchase individual installment sales finance contracts from automobile dealers and retail vendors, extend direct cash loans to non-prime borrowers secured by automobiles, extend short-term installment loans, and offer credit cards to customers. The insurance subsidiaries of these companies underwrite and sell credit-related insurance to the loan customers of the finance companies through captive distribution channels, as well as through alliances with other lending institutions. Other products include involuntary unemployment insurance, forced placed homeowners, and auto physical damage.

These ratings will remain under review until A.M. Best can meet with the management of Mercury Finance and the respective insurance companies to discuss the longer-term implications for the insurance operations, including a new business plan and ongoing operations of the insurance subsidiaries after the completion of the acquisition. In the fourth quarter of 1995, Mercury Finance acquired Lyndon Property and Lyndon Life from ITT Financial Corp. The acquisition caused a significant restructuring in products and distribution channels of the two companies and led to a revised business plan.

A.M. Best Company, established in 1899, is America’s oldest and most widely recognized insurance rating and information source.

CONTACT: A.M. Best Co.

Jeffrey Dunsavage, 908/439-2200 ext.5618