AIG Edison Life Insurance Co.
S&P placed its 'A+' FSR on AIG Edison Life Insurance Co. on CreditWatch with developing implications.
The rating action follows AIG's announcement that it has reached an agreement to sell AIG Star and AIG Edison to Prudential Financial for $4.8 billion, S&P says. The CreditWatch placement reflects the agency’s view that it could raise or lower the rating on AIG Edison in the next six months.
The 'A+' rating is based on a guarantee provided by American Home Assurance Co. (A+/negative/--). S&P expects this guarantee to remain in place until the sale is completed.
Aioi Insurance Co. Ltd.
Moody's says the merger between Aioi Insurance Co. Ltd. (Aioi; A1 IFSR/stable) and Nissay Dowa General Insurance Co. Ltd. (Nissay Dowa, not rated by Moody's) will not affect its rating on Aioi, which will be the surviving entity.
Aioi Nissay Dowa Insurance Co. Ltd. (Aioi Nissay Dowa)—the name of the new entity—will assume the A1 rating on Oct. 1, 2010. The rating outlook remains stable.
In Moody's view, the merger will not materially affect the credit profile of Aioi, given that it is much larger than Nissay Dowa and that the two companies have similar credit profiles. Both business portfolios concentrate on auto insurance products, which have a fairly low risk of deviation from pricing expectations. A key risk factor is capital impairment risk due to both companies' domestic equities exposure.
A.M. Best Co. assigned a debt rating of “bbb+” to the recently issued $132 million, 7% senior unsecured notes due Sept. 30, 2050, of American Financial Group Inc. (AFG). The assigned outlook is stable.
The proceeds from this debt offering will be utilized for general corporate purposes by AFG. Following the issuance of the debt, AFG’s unadjusted debt-to-total capital ratio at year-end 2010 is projected to be less than 20.0%. Both the financial leverage and coverage ratios remain well within A.M. Best’s guidelines for AFG’s debt ratings, and are expected to remain so over the near term.
After the announcement of a plan for American International Group Inc. (AIG) to repay the government, rating agencies issued responses. The announcement of a plan to repay the FRBNY Credit Facility and to convert the various ownership interests of the U.S. Government to common equity, which will ultimately be sold to public investors, marks the beginning of the final phase of the process begun in September 2008 to stabilize AIG, according to A.M. Best. Under the proposal, the line of credit extended to AIG by the FRBNY will be repaid before the end of the first quarter of 2011, primarily using proceeds from the initial public offering of AIA Group Limited (AIA) and the previously-announced sale of American Life Insurance Co. (ALICO) to MetLife, Inc. In addition, most of the preferred interests in special purpose vehicles (SPVs) established to facilitate the sale of AIA and ALICO currently held by the FRBNY will be transferred to the U.S. Treasury Department in a series of transactions.
A.M. Best Co. commented that the issuer credit rating (ICR) of “bbb” of AIG is unchanged. The rating outlook remains negative. The ratings of all AIG subsidiaries are unchanged.
Moody's Investors Service has affirmed the long-term ratings of AIG (long-term issuer rating of A3) following the announcement. Also affirmed were the Aa3 insurance financial strength (IFS) ratings of Chartis U.S. and the A1 IFS ratings of SunAmerica Financial Group (SFG). The rating outlook for these entities remains negative, reflecting the risk that the government would conclude its ownership and support of AIG before the company achieves a full recovery of its core operations and an exit from or de-risking of non-core businesses.
S&P assigned its 'BB' global scale and 'P-3' Canadian scale ratings on Toronto-based Fairfax Financial Holdings Ltd.'s pending issuance of up to C$250 million in preferred shares, with an option on an additional C$50 million available to the underwriters.
Fairfax intends to issue the preferred shares from its current $2 billion universal shelf filing. It will use the proceeds to augment its cash position, to increase short-term investments and marketable securities held at the holding company, to retire outstanding debt and other corporate obligations, and for general corporate purposes.
The ratings on Fairfax reflect its strong business and financial profiles, S&P says. Fairfax, through its insurance operating subsidiaries—including Odyssey Reinsurance, Northbridge Financial units, Crum Forster, and Zenith Insurance—maintains a competitive presence in the North American commercial insurance marketplace, as well as in the global reinsurance market.
A.M. Best affirmed the FSRs of A+ (superior) and ICR of “aa” of FM Global Group (FM Global) and its lead company, Factory Mutual Insurance Co. (Factory Mutual), and its other members, which include FM Insurance Co. Ltd. (FMI), Appalachian Insurance Co., (Appalachian) and Affiliated FM Insurance (Affiliated FM). The outlook for all ratings is stable.
The affirmation of the ratings reflects FM Global’s very strong capitalization, solid operating performance, benefits from its loss prevention technology and property conservation, and its market leadership position in the commercial property market, A.M. Best says. In addition, FM Global utilizes a very conservative approach to risk management that permeates all aspects of the group’s operations.
National Safety Life Insurance Co.
A.M. Best has withdrawn the FSR of B+ (good) and ICR of “bbb-” and assigned an NR-5 (Not Formally Followed) to the FSR and “nr” to the ICR of National Safety Life Insurance Co. (National Safety Life). National Safety Life is a former indirect subsidiary of Columbian Mutual Life Insurance Co. (CML).
The rating actions reflect the merger of National Safety Life with and into Columbian Life Insurance Co. (CLIC), also an indirect subsidiary of CML. CML and CLIC are integral members of the Columbian Financial Group (CFG). The core businesses of CFG are focused on the small face amount life insurance niche: home service, final expense life insurance marketed through independent marketing organizations (IMOs) and pre-need life insurance marketed by funeral homes and IMOs.
A.M. Best Co. has upgraded the FSR to A (excellent) from A- (excellent) and ICR to “a” from “a-” of Praetorian Insurance Co. (Praetorian) and NAU Country Insurance Co. (NAU), both operating companies of QBE Americas Group (QBE Americas). In addition, A.M. Best affirmed the FSRs and ICRs of other operating entities of QBE Americas, which include QBE Re Group – US (QBE Re) and its members, North Pointe Insurance Co. (NPIC) North Pointe Casualty Insurance Co. (NPCIC).
Concurrently, A.M. Best upgraded the ICRs to “a+” from “a” and affirmed the FSRs of A (Excellent) of QBE Regional Insurance Group and its members. The outlook for all ratings is stable, except for the ratings of NAU, which have been removed from under review with positive implications and assigned a stable outlook.
Each rating action considers the company’s strategic role and importance to the overall specialty operations of QBE Americas, the explicit and implicit support provided by QBE and its affiliates, as well as the independent attributes of each company including risk-adjusted capitalization, operating performance and business profile, A.M. Best says.
The upgrading of the ICR for QBE Regional recognizes its strong historical operating profitability and its importance to QBE Americas, as QBE Regional is QBE’s largest premium and earnings producer, according to the rating agency. The upgrading of the ratings of Praetorian and NAU also reflect the explicit quota share reinsurance support received from their reinsurance affiliate, Equator Reinsurances Limited, as well as anticipated business and profitability prospects from being part of QBE.
All four rating agencies reacted to the announcement of Prudential Financial Inc.’s (PFI) planned acquisition of two Japanese life insurance companies, AIG Star Life Insurance Co. Ltd and AIG Edison Life Insurance Co. (together known as Star Edison), from AIG for $4.8 billion.
A.M. Best commented that the ratings for the domestic life/health insurance companies of Prudential Financial Inc. (PFI) remain unchanged. Star Edison operates exclusively in the Japanese market selling traditional life, traditional fixed annuity and medical per diem hospital products, utilizing both captive and independent distribution channel platforms. A.M. Best believes the transaction will improve PFI’s market position in Japan and will expand its distribution capacity in the growing bank channel while increasing the firm’s exposure to revenue and earnings from international operations. Additionally, the transaction will modestly impact financial leverage and fixed charge coverage ratios, as well as proportionally reduce PFI’s exposure to the equity markets.
Fitch Ratings has affirmed the 'BBB+' issuer default rating (IDR) and 'BBB' senior debt ratings of PFI. At the same time, Fitch has affirmed the 'A+' Insurer Financial Strength (IFS) ratings of Prudential Insurance Company of America (PICA) and all of the group's ratings. The outlook for all ratings is stable.
Fitch believes the acquisition will strengthen PFI's already strong position in the Japanese life insurance market, adding significant scale and distribution capacity as well as an additional source of stable earnings going forward. Mortality-based earnings in Japan are already the most important source of earnings for PFI, helping to offset the impact of equity market volatility related to variable annuities in the U.S. operations.
Following the close of the transaction, Fitch expects PFI's equity-adjusted financial leverage to increase modestly but remain within Fitch's expectations. At June 30, 2010, Fitch's equity adjusted leverage was 25%. Fitch expects PFI's GAAP EBIT-to-interest expense coverage ratio to remain in the range of 5-6 times (x). The Total Financing and Commitments (TFC) ratio is expected to remain at 1.3x on a pro forma basis.
Moody's affirmed the debt ratings of PFI (senior debt at Baa2) and the A2 long-term IFS ratings of Prudential Insurance Company of America (PICA) and its affiliates, with a stable outlook.
Moody’s said the affirmation is based on the strategic diversification and future cash flow benefits that Star/Edison will bring to Prudential.
S&P affirmed its 'A' long-term and 'A-1' short-term counterparty credit ratings on PFI and all the ratings, including its 'AA-' financial strength ratings, on PFI's core insurance subsidiaries. The outlook remains stable.
The rating agency also believes the Star/Edison businesses should complement PFI's existing operations in Japan. Moreover, it believes that the acquisition will improve PFI's economies of scale in Japan and will create cost synergies. While S&P expects the acquisition to increase earnings in 2011, integration costs and higher interest expense will likely be a slight drag on fixed-charge coverage in 2011.
Fitch Ratings downgraded Prudential Plc's (Prudential) long-term IDR to 'A+' from 'AA-' and senior unsecured debt to 'A' from 'A+'. At the same time, Fitch has removed both ratings from rating watch negative (RWN).
Fitch also downgraded Prudential Assurance Co. Ltd.'s (PAC) IFS rating to 'AA' from 'AA+' and removed it from RWN. At the same time, Fitch removed from RWN and affirmed the IFS ratings of Prudential's US subsidiaries Jackson National Life Insurance Co. and Jackson National Life Insurance Company of New York (collectively, JNL) at 'AA'. The outlooks on all of the group's long-term IDRs and IFS ratings are stable.
The downgrades reflect Fitch's conclusion that Prudential's risk appetite is somewhat higher than previously factored into the ratings. This view is based primarily on the company's failed $35.5 billion bid to acquire AIA Group Ltd, the Asian subsidiary of American International Group Inc—a transaction that would have been a transformational deal with significant execution risks. Fitch had placed Prudential's ratings on RWN when the bid was announced. After the failure of the bid, the agency maintained the RWN pending a full review of the ratings.
