A.M. Best Co. has revised the outlook to negative from stable, and affirmed the financial strength rating (FSR) of A+ (superior) and issuer credit ratings (ICR) of “aa-” of Alfa Insurance Group (Alfa Group) and its members.
Additionally, A.M. Best affirmed the FSR of A+ (superior) and ICR of “aa-” of Alfa Life Insurance Corp. (Alfa Life). The outlook for these ratings is negative.
The ratings for Alfa Group reflect its adequate risk-adjusted capitalization, dominant market presence and sustainable competitive advantages in Alabama, varied distribution system and expanded geographic diversification. These rating factors are derived from an experienced management team, which employs sound risk management practices and a conservative reserving philosophy that emphasizes exceptional customer service and claims handling.
Fitch Ratings affirmed the 'BBB+' senior debt rating of The Allstate Corp. (Allstate) and the 'A+' insurer financial strength (IFS) ratings of Allstate's property/casualty subsidiaries. Fitch has also downgraded the life subsidiaries to 'A-' from 'A'. The rating outlook is stable. A full list of ratings can be found below.
The affirmation of Allstate's holding company and property/casualty ratings recognizes greater profitability as consolidated net income reached $854 million, up from a net loss of $1.7 billion in 2008, Fitch says. A significant improvement in realized investment losses to $583 million in 2009 from $5.1 billion in 2008 accounted for most of the change in the bottom line. Although shareholders' equity increased by $4 billion to $16.7 billion, this level of equity was still significantly below 2007's nearly $22 billion mark.
The rating downgrade on Allstate's life operations reflects Fitch's reassessment of its strategic importance within the Allstate enterprise and view that the “standalone” IFS rating is in the 'BBB' range. The stable outlook reflects considerable improvement in consolidated unrealized losses in invested assets and growth in property/casualty surplus, which brought capitalization at the property/casualty operation closer to its financial strength rating.
A.M. Best Co. removed from under review with developing implications and affirmed the financial strength rating of B+ (good) and issuer credit rating of “bbb-” of Cooperative Mutual Insurance Co. This follows the March 10, 2010, completion of its affiliation with Austin Mutual Insurance Co. The outlook assigned to Cooperative’s ratings is stable. The ratings of Austin Mutual are unaffected.
The affiliation agreement with Austin Mutual should begin to stabilize Cooperative’s operating results in the near term, the rating agency says. While Cooperative will remain a stand-alone company, Austin Mutual has provided a $1 million surplus note, along with a 25% quota share reinsurance agreement and will appoint a majority of the members of Cooperative’s Board of Directors.
A.M. Best Co. affirmed the ICR of “bbb+” of The Hartford Financial Services Group Inc. The outlook for this rating is negative.
Additionally, A.M. Best affirmed the FSRs of A (excellent) and ICRs of “a+” of the key life/health insurance subsidiaries of The Hartford (collectively known as Hartford Life). The outlook for the FSRs has been revised to stable from negative, while the outlook for the ICRs is negative.
A.M. Best also has affirmed the FSR of A (excellent) and ICRs of “a+” of the key property/casualty insurance subsidiaries of The Hartford (collectively known as the Hartford Insurance Pool). The outlook for the FSR is stable, while the outlook for the ICRs has been revised to stable from negative.
Concurrently, A.M. Best has assigned a debt rating of “bbb-” to the recently issued $575 million 7.25% mandatory convertible preferred stock, converting into common stock on April 1, 2013. In addition, A.M. Best assigned debt ratings of “bbb+” to the recently issued $300 million 4.0% senior unsecured notes due 2015, $500 million 5.5% senior unsecured notes due 2020 and $300 million 6.625% senior unsecured notes due 2040. The assigned outlook is negative.
A.M. Best Co. affirmed the FSR of A (excellent) and ICR of “a” of Highmark Inc. and its interactively rated health subsidiaries. Additionally, A.M. Best affirmed the senior debt rating of “a-” of Highmark. The outlook for these ratings is negative.
A.M. Best also affirmed the FSRs of A- (excellent) and ICRs of “a-” of Highmark’s life/dental subsidiaries as well as Highmark Casualty Insurance Co. and its reinsured affiliate, HM Casualty Insurance Co. The outlook for these ratings is stable.
The ratings of Highmark and its health subsidiaries reflect their positive underwriting and net income results, the organization’s strong market share and improved capitalization, A.M. Best says. Highmark has been able to achieve positive results on both an underwriting and net income basis due to regional and line of business strategies to address both short- and long-term operating performance and growth objectives. With the improvement in the capital markets, Highmark’s investment portfolio has regained market value, which has strengthened its capital position. Capital levels also benefit from the retention of positive net income as retained earnings.
A.M. Best Co. downgraded the FSR to B+ (good) from B++ (good) and ICR to “bbb-” from “bbb” of Interstate Bankers Casualty Co. (Interstate Bankers). The rating outlook has been revised to negative from stable.
The rating actions reflect Interstate Bankers significant growth in premium volume in 2009 that followed rapid premium growth in 2007 and 2008, primarily resulting from additional premium in personal auto liability, a line of business Interstate Bankers began writing in late 2007. This has resulted in highly elevated premium and underwriting leverage ratios. Consequently, Interstate Bankers risk adjusted capitalization has deteriorated to a level that no longer supports its previous rating, the rating agency says. The negative rating outlook reflects the possibility of further rating actions should there be continued deterioration in underwriting leverage and risk-adjusted capitalization.
A.M. Best Co. affirmed the FSR of A+ (superior) and ICR of “aa-” of the two life/health subsidiaries of Nationwide Financial Services Inc. (NFS)—Nationwide Life Insurance Co. (NLIC) and Nationwide Life and Annuity Insurance Co. NFS is indirectly owned by Nationwide Mutual Insurance Co. (Nationwide Mutual) and Nationwide Mutual Fire Insurance Co.
Additionally, A.M. Best affirmed the ICR of “a-” of NFS and all debt ratings of NFS and NLIC. The outlook for all ratings is negative.
These ratings reflect NFS’ diversified business profile across multiple product lines, extensive brand recognition, leading market position within public sector retirement plans and stable-to-improving net flows within its retirement and individual annuity business lines. Furthermore, A.M. Best says NFS continues to maintain favorable-risk adjusted and absolute capital levels, despite the difficult economic environment.
Nationwide Group, its members and affiliates
A.M. Best Co. affirmed the FSR of A+ (superior) and ICR of “aa-” of Nationwide Group (Nationwide) and its four property/casualty pooled members and 23 reinsured affiliates. Concurrently, A.M. Best affirmed the debt ratings of “a” of the five surplus notes totaling $2.2 billion issued by Nationwide Mutual Insurance Co. The outlook for all ratings is negative.
Nationwide’s ratings reflect its adequate level of risk-adjusted capitalization that supports the ratings; however, the group reported several years of volatile underwriting performance in its core lines of business due to weather related losses, A.M. Best says.
Nationwide benefits from diversified product offerings that include standard and specialty personal, commercial and surplus lines of business. The ratings further recognize Nationwide’s market presence, multiple distribution channels and decentralized operational structure, which is designed to provide superior service to its agents and policyholders.
The negative outlook reflects the challenges that management will face to improve underwriting profitability and continue to organically rebuild surplus with a potentially lower level of investment income. Nationwide’s surplus and risk-adjusted capitalization significantly declined with the Jan. 1, 2009 privatization of Nationwide Financial Services Inc., although both measures improved throughout the year from issuance of a surplus note, the generation of statutory income and unrealized investment gains.
A.M. Best Co. assigned a debt rating of “aa” to the $1.75 billion 6.063% 30-year surplus notes recently issued by The Northwestern Mutual Life Insurance Co. (Northwestern Mutual, Milwaukee, Wis.). The rating outlook is stable. The existing financial strength and issuer credit ratings of Northwestern Mutual and its affiliate are unchanged.
The proceeds from the offering will be used by Northwestern Mutual to provide additional liquidity and capital cushion and for general corporate purposes. A.M. Best notes that the company has no other surplus notes, and the pro forma adjusted financial leverage and interest coverage ratios are expected to remain well within the guidelines for the company’s current ratings.
Fitch Ratings assigned an 'AA' rating to The Northwestern Mutual Life Insurance Co. surplus note issue. In addition, Northwestern Mutual is assigned an issuer default rating (IDR) of 'AAA', the same as its current IFS rating. The rating outlook for Northwestern Mutual is stable.
The 'AA' rating assigned to the surplus notes reflects Fitch's standard notching from the company's 'AAA' IFS rating and considers the subordination of the surplus notes relative to both policyholder and senior debt obligations.
Fitch expects proceeds from the surplus note issuance will be used to further strengthen NM's already strong capital position.
S&P affirmed its 'A+' long-term counterparty credit and insurer FSRs on Swiss Re Life & Health Canada. The ratings were subsequently withdrawn at the request of management. Effective Jan. 1, 2010, all of the reinsurance liabilities and business of Swiss Re Life & Health Canada were transferred to the Canadian branch of its parent, Swiss Reinsurance Company Ltd. The parent company transferred the liabilities to simplify its legal entity structure in Canada, a process which S&P expects will result in the dissolution of Swiss Re Life & Health Canada in the third quarter of 2010.
The Canadian branch of the parent company now handles all the group's Canadian property/casualty and life and health reinsurance business, according to S&P.
