A.M. Best http://www.ambest.com, Fitch Ratings http://reports.fitchratings.com, Moody’s Investors Service http://v3.moodys.com/Pages/default.aspx and Standard & Poor’s (S&P) http://www.standardandpoors.com/home/en/us released ratings updates. The following are some of the most recent:
Moody's Investors Service placed Aetna Inc.'s ratings under review for possible downgrade following the company's earnings release for fourth quarter 2009 and initial 2010 earnings guidance.
Moody’s said that while Aetna's business profile remains strong with a strong national brand, diverse membership base and limited exposure to government products (Medicare Advantage and Medicaid), there are concerns that the lower earnings results reported in 2009 and projected for 2010 would continue beyond the next year. The net after-tax margin for 2009 was 3.7% and is projected to be lower in 2010, compared to an average net after-tax margin of over 6% for the five years prior.
Moody's review will focus on Aetna's re-pricing strategy, including the proposed time horizon and other medical management and contracting initiatives the company has (or will have) undertaken. The last rating action on Aetna was on April 1, 2009, when the ratings were affirmed with a stable outlook.
Allianz Life and Its Subsidiaries
A.M. Best Co. affirmed the financial strength rating (FSR) of A (excellent) and issuer credit ratings (ICR) of “a+” of Allianz Life Insurance Co. of North America and its subsidiary, Allianz Life Insurance Co. of New York. Concurrently, A.M. Best affirmed the FSR of A (excellent) and ICR of “a” of Allianz Life and Annuity Co. (ALAC). The three companies are collectively known as Allianz Life. The outlook for all ratings is stable.
These ratings reflect Allianz Life’s strategic position under its ultimate parent, Allianz Societas Europaea (Allianz SE), its leading U.S. market position within the fixed index annuity market, strong liquidity, unlevered balance sheet and well-developed risk management practices, A.M. Best says. Additionally, the ratings reflect Allianz SE’s global business profile as a leading financial services company with core business segments in life/health, property/casualty and financial services.
Moody's affirmed the Baa1 senior debt rating of AXIS Capital Holdings Ltd. and the A2 insurance FSRs of its operating subsidiaries. The outlook is stable. The rating action follows the company's release of fourth quarter 2009 results, which included a loss provision on a $399 million credit insurance policy related to Blue City Investments.
According to Moody's, the Baa1 senior unsecured debt rating on AXIS Capital is based on the credit support provided by its various insurance operating subsidiaries and good borrowing capacity and financial flexibility due to comparatively moderate financial leverage (estimated 14% debt-to-capital as of 12/31/2009 assuming 50% equity credit for the preferred shares and including operating lease debt equivalents).CIFG Guaranty http://www.cifg.com/
S&P withdrew its 'CC' financial strength, financial enhancement and counterparty credit ratings on CIFG Guaranty, CIFG Europe and CIFG Assurance North America Inc. at the company's request.
"The 'CC' ratings and negative outlook reflect the significant declines in statutory surplus levels at these companies, which leave them vulnerable to regulatory intervention," said Standard & Poor's credit analyst David Veno. "The ratings also reflect the companies' insured exposure to various asset classes that could experience adverse loss development, which would further weaken their surplus positions."
Coventry Health Care Inc. and its Subsidiaries
A.M. Best Co. affirmed the FSR, ICR and debt ratings of Coventry Health Care Inc. and its subsidiaries.
Coventry’s operating results remain profitable; however, following its continuous earnings growth in the seven-year period up to 2007, net income declined 39% in 2008 vs. 2007, and an additional 37% in 2009 compared to 2008, while earnings from continuing operations declined approximately 13%, the rating agency says.
The company’s earnings are expected to improve in 2010 with improved commercial pricing, combined with some benefit changes for Medicare Advantage as well as reductions in the administrative expense. Lower earnings led to a risk-based capitalization decline in 2008; however, during 2009, Coventry significantly reduced dividends from its health plans and made capital contributions to several subsidiaries, allowing for its consolidated level of capital to improve. Furthermore, Coventry substantially improved its financial leverage during 2009 with $69 million in bond buy backs and a $235 million revolver pay down. As a result, the debt/capital ratio was 30.1% at year-end 2009, compared to 35.7% in fourth quarter 2008. Coventry has a strong liquidity position, with $510 million cash on hand and $380 million line of credit available as of Dec. 31, 2009, A.M. Best says.
A.M. Best Co. has affirmed the FSR of A (excellent) and the ICR of “a+” of Hannover Life Reassurance Bermuda Ltd. (HLR Bermuda). The outlook for both ratings remains stable, in line with that of its parent company, Hannover Rueckversicherung AG (Hannover Re).
The ratings reflect the company’s strong level of risk-adjusted capitalization, good underwriting profitability and high level of integration within the Hannover Life Reinsurance (HLR) group, the rating agency says.
Fitch Ratings affirmed the ratings of Principal Financial Group Inc. (PFG) and its subsidiaries. The affirmation includes the insurer financial strength (IFS) ratings of PFG's primary life insurance company subsidiaries at 'AA-' and its holding company senior debt rating at 'A-'. The rating outlook remains negative.
The affirmation reflects Fitch's belief that PFG has sufficient resources and flexibility available to mitigate most likely investment losses under current economic conditions. Principal Life Insurance Co.'s investment portfolio contains concentrations in commercial mortgage backed securities (CMBS) and financial sector securities, for which Fitch's outlook has grown more negative since the rating action in February 2009.
S&P revised the outlook on its long-term counterparty credit and insurer FSRs on U.K.-based non-life insurer Provident Insurance PLC to positive from stable due to its intended sale by its parent, GMAC Inc. In addition, the 'BB+' ratings were affirmed. The ratings on Provident Insurance reflect the impact of the weak credit quality of GMAC Inc. offset by Provident Insurance's good stand-alone characteristics. These include its very conservative investments and strong capitalization. These positive factors are diminished, however, by increased industry and underwriting performance pressure, S&P says.
The outlook continues to reflect S&P’s understanding that the company's financial strength will be protected to a significant extent by its supervisor, the U.K. Financial Services Authority. If the sale does not occur, or the financial strength is not adequately protected, it could lead to a negative rating action.
Fitch Ratings and S&P announced action on ratings of Security Benefit Life Insurance Co. (SBLIC), following the announcement that Security Benefit Corporation, which is the intermediate holding company that owns SBLIC and affiliate, First Security Benefit Life Insurance and Annuity Company of New York (FSBLIANY), reached a definitive agreement to be acquired by Guggenheim Partners, LLC (Guggenheim) and a group of investors. The new owners will then pursue a demutualization of the insurance operations. Guggenheim has served in an investment advisory role for Security Benefit's general account since June 2009.
Fitch Ratings has placed the 'CCC' IFS ratings of SBLIC and FSBLIANY, collectively referred to as Security Benefit, on rating watch positive.
Fitch downgraded Security Benefit's ratings to 'CCC' on June 1, 2009, reflecting Fitch's growing concerns around a significant deterioration in SBLIC's risk-adjusted capital and liquidity position, as well as the company's exposure to further investment impairments. Fitch believes that the investment of approximately $400 million announced by the Guggenheim-led group will serve to enhance Security Benefit's capital position, and may lead to an upgrade of the company's ratings following completion of the transaction. Fitch will also evaluate the planned capitalization after demutualization.
S&P revised the CreditWatch status of its 'BB' counterparty credit and FSRs on SBLIC and FSBLIANY to positive from negative.
State Mutual Insurance Co.
A.M. Best Co. revised the outlook to negative from stable and affirmed the FSR of B+ (good) and ICR of “bbb-” of State Mutual Insurance Co. (State Mutual).
The revised outlook reflects A.M. Best’s growing concerns regarding State Mutual’s exposure to real estate-related investments and its declining premium writings. State Mutual’s real estate and mortgage loan holdings currently represent approximately 200% of total surplus, which is quite high for a company of its size.
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