S&P’s ratings on Allstate Corp. (A-/stable/A-2) and its operating subsidiaries are not affected by the announcement that Allstate is exiting the banking business. As part of this transaction, approximately $1 billion in the deposits of Allstate Bank, which constitutes about 1% of Allstate's total assets, will be sold to Discover Financial Services. The transfer of deposits will not affect insurance policies and other nonbanking products.
This transaction is consistent with management's strategic initiative to focus on insurance, retirement, and investment products, and it is expected to close by mid-year, subject to regulatory approval, the rating agency says.
Fitch and S&P released statements following American International Group Inc.’s (AIG) announcement that it expects to report a $4.1 billion charge for the fourth quarter of 2010 to strengthen loss reserves in its Chartis property/casualty insurance operations. In addition, AIG announced it entered into an agreement with the U.S. Department of the Treasury permitting AIG to apply $2 billion of the net cash proceeds from the recently closed sale of AIG Star Life Insurance Co. Ltd. and AIG Edison Life Insurance Co. to support the capital of the Chartis Insurance subsidiaries in connection with the loss-reserve strengthening.
A.M. Best commented that the financial strength rating of A (excellent) and issuer credit ratings of “a” of the Chartis U.S. Insurance Group (Chartis) are unchanged. The outlook for the ratings is negative. Despite the significant increase in Chartis’ reserves, the ratings remain unchanged, as A.M. Best contemplated a reserve shortfall in its most recent assessment of the group’s reserves and thus views the charge as being within its previous estimate of the group’s reserve deficiency. Furthermore, the capital contributions to the operating Chartis insurance companies are expected to neutralize any change in statutory surplus and Chartis’ risk-adjusted capitalization as estimated by A.M. Best via Best’s Capital Adequacy Ratio following the increase in reserves.
Fitch downgraded the insurer financial strength (IFS) ratings of American International Group Inc.'s (AIG) domestic non-life insurance subsidiaries to 'A' from 'A+'. Fitch concurrently affirmed AIG's issuer default rating (IDR) rating and debt ratings as well as life insurance subsidiaries' IFS ratings. The outlook for all ratings is stable. A complete list of ratings is included at the end of this commentary. The rating actions reflect Fitch's view that the volatility of AIG's domestic non-life subsidiaries' reserves is inconsistent with expectations for the 'A+' ratings level.
The agency views AIG's recent record of adverse reserve development as a significant outlier relative to that of the company's large commercial insurance lines competitors and to the overall non-life insurance market. Fitch believes that this is partially attributable to AIG's larger than its peers' market share in long-duration excess casualty and workers’ compensation business lines, which presents significant and unique reserving challenges. The agency notes that AIG has reduced these business lines' relative contribution to the company's overall non-life premium base with a goal that this could contribute to more stable reserves going forward.
S&P’s ratings on AIG (A-/Negative/A-2) and AIG's insurance subsidiaries are not affected by the company's announcement. The 'A-' long-term counterparty credit rating on AIG continues to receive a one-notch of uplift from the stand-alone credit profile because of the continued, albeit diminished, support from the U.S. government.
The 'A+' ratings on AIG subsidiaries Chartis and SunAmerica Financial Group reflect S&P’s opinion of the companies' combined strong and diverse competitive profile, consolidated capital adequacy, and historically strong—though diminished—operating performance. Enterprise risk management (ERM) is a weakness to the ratings, and the announced reserve charge raises concerns regarding overall risk controls. The outlook on AIG and its primary insurance operations remains negative because of the uncertainty of the core insurance companies' operating performance.
S&P revised its outlook on Arrowhead General Insurance Agency Inc. (Arrowhead) to stable from negative. At the same time, the rating agency affirmed its 'B-' counterparty credit rating on Arrowhead.
S&P also assigned a 'B-' rating on Arrowhead's pending $115 million first-lien term loan, due 2016, and $15 million revolver, due 2015. The agency expects the revolver to remain undrawn at closing. The recovery rating on the senior secured credit facilities is '3', which indicates our expectation of meaningful (50% to 70%) recovery for lenders in the event of a payment default.
In addition, S&P assigned a 'CCC' rating on Arrowhead's pending $42 million second-lien term loan, due in 2017. The recovery rating on the second-lien term loan is '6', indicating S&P’s expectation of negligible (0% to 10%) recovery for lenders in the event of a payment default.
The outlook to stable revision reflects S&P’s view that Arrowhead's refinancing will improve its liquidity metrics prospectively. The rating agency expects the new credit agreement to have more favorable financial covenants than those of its existing facilities, which should mitigate our concerns on Arrowhead remaining covenant-compliant.
The stable outlook also reflects Standard & Poor's view that Arrowhead's operating performance moderately improved from the prior year.
A.M. Best revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of A (excellent) and issuer credit ratings (ICR) of “a” of The Auto Club Group and its members.
The negative outlook is based on the deterioration in the group’s operating earnings in recent years, driven by unfavorable underwriting results.
The Auto Club Group’s ratings reflect its strong risk-adjusted capitalization, modest five-year operating performance and well-established position as a personal lines market leader in Michigan, as well as the benefits derived from offering insurance products to AAA members.
A.M. Best, Moody’s and S&P assigned ratings to the forthcoming $400 million 5.75% senior unsecured notes due 2021 to be issued by CNA Financial Corp. (CNAF). CNAF intends to use the net proceeds of the senior notes issuance, together with cash on hand and available liquidity, to repay or otherwise retire the outstanding principal balance of its $400 million 6.00% senior notes, due August 15, 2011.
A.M. Best assigned a debt rating of “bbb” to the notes. The assigned outlook is stable. Considering the forthcoming $400 million senior notes offering, the proforma year-end 2010 estimated adjusted financial leverage increases to 21.8%, which is well within A.M. Best’s guidelines for CNAF’s current ratings. In 2011, A.M. Best estimates profitable operating income, combined with the planned retirement of the $400 million senior notes due in August, will result in adjusted financial leverage below 20% by year-end.
Moody's assigned a Baa3 rating to the notes. The outlook for the ratings is stable. According to Moody's, the ratings on CNA Financial Corp. and its subsidiaries reflect the group's leadership position in many major commercial and specialty property/casualty insurance lines in the United States, its good risk-adjusted capitalization, as well as its improved financial flexibility and operational controls, profitable specialty lines segment, and the historically supportive parentage of Loews Corp. (senior unsecured debt rated A3). These strengths remain tempered by earnings volatility over time and high combined ratios in the commercial lines segment, potential claim reserve volatility, and by general industry risks arising from the group's exposures to natural and man-made catastrophes. Adjusted financial leverage on a pro forma basis is expected to increase modestly, but to remain comfortably within the range of Moody's expectations at the current rating level.
S&P assigned its 'BBB-' debt rating to the notes. The ratings on CNA Financial and its core operating companies reflect the group's strong competitive position in the U.S. property/casualty commercial lines insurance market, strong property/casualty specialty lines operating performance, and strong capital that is well redundant for the rating level, S&P says. For 2011, the agency expects continuation of strong performance in the specialty segment and improvement in the commercial line insurance market.
Moody's assigned ratings to the multi-seniority shelf registration of The Hartford Financial Services Group Inc., with a provisional senior unsecured debt rating of (P)Baa3. The current shelf registration replaces a prior expired shelf, whose ratings have been withdrawn. The outlook for The Hartford's ratings is stable.
The ratings on The Hartford's lead P&C companies (IFS at A2) are based on the group's significant market presence, strong brand name recognition, excellent product and geographic diversification, historically conservative underwriting standards and reasonably positioned investment portfolio, Moody’s says.
The ratings of The Hartford's lead life insurance companies (IFS at A3) are based on a strong market position in group insurance, the company's recognizable brand name, well-diversified distribution channels, and a broad product portfolio that provides multiple sources of earnings.
The company's debt ratings currently are primarily based on support from its P&C operating subsidiaries. Moody's does not consider the organization's life insurance operating subsidiaries to be a supporter of the parent over the medium term due to a continued potential for capital volatility at the life operation under a stressed investment market scenario.
Moody’s and S&P affirmed ratings on QBE Insurance Group Ltd. (QBE) following the insurers announcement of plans to buy Balboa Insurance's U.S. property insurance portfolio and distribution rights for $700 million.
Moody's affirmed its A3 issuer rating for QBE. At the same time, Moody's maintains a stable outlook on all the ratings of QBE. The affirmation of QBE's ratings with a stable outlook is based on the fact that the acquisition will not materially impact its financial fundamentals and in view of its strong profitability. Furthermore, the acquisition is expected to meet QBE's target return on capital, Moody’s says. Further, Moody's believes that the funding arrangement for the acquisition, which is based on a combination of cash, a fully underwritten dividend reinvestment plan, and short-term bank lines, will only, as mentioned, increase financial leverage marginally.
S&P affirmed its 'A' rating on QBE and its 'A+' rating on QBE's core operating companies. The outlooks on all ratings are stable. The agency believes that if the integration is successful, the acquisition will marginally improve QBE's business profile as a result of an improvement in product line diversity. Standard & Poor's expects that QBE will structure financing of the deal so that the company's capitalization does not deteriorate over the coming year.
The rating outlooks also reflect S&P’s expectation that QBE Group will maintain a solid balance sheet structure as it continues to pursue acquisitions to drive growth.
A.M. Best revised the outlook to stable from negative and affirmed the issuer credit ratings (ICR) of “aaa” of Teachers Insurance and Annuity Association of America (TIAA) and its insurance operating subsidiary, TIAA-CREF Life Insurance Co. (TIAA-CREF Life). TIAA-CREF Life has a financial support agreement with TIAA. A.M. Best also revised the outlook to stable from negative and affirmed the debt ratings of “aaa” on the senior unsecured medium-term notes issued by TIAA Global Markets, Inc. (TGM) and the debt rating of “aa” on TIAA’s outstanding surplus notes.
Concurrently, A.M. Best has affirmed the financial strength rating (FSR) of A++ (superior) of TIAA and TIAA-CREF Life. The outlook for the FSR is stable. A.M. Best has withdrawn the AMB-1+ commercial paper rating as TIAA terminated its $2 billion commercial paper program last year.
The rating actions reflect TIAA’s stable and sustainable overall net operating performance from its core businesses, which in part, has enabled TIAA to increase its total absolute capital and surplus and maintain its strong level of risk-adjusted capital despite several consecutive years of significant—albeit declining—investment losses. These losses were triggered primarily by the effects of the recent financial crisis and the associated precipitous declines in the U.S. residential and commercial mortgage markets.
Going forward, A.M. Best expects TIAA to continue to generate favorable operating performance trends and maintain strong risk-adjusted capital levels for its current business and investments risks.
The rating actions also recognize TIAA’s well-established position in the higher education pension market as well as its extremely stable liability profile.
Moody's and S&P assigned ratings to UnitedHealth Group's issuance of $750 million of new long-term debt. The issuance will consist of a mix of 10-year and 30-year maturities. UnitedHealth expects to use the net proceeds of the new issuance for general corporate purposes including refinancing of maturing debt.
Moody’s assigned a Baa1 senior unsecured debt rating to the issuance. The outlook on the rating is stable. The rating agency says the debt issuance is a draw on the company's new shelf registration, and therefore assigned a provisional rating (senior debt at (P)Baa1) to UnitedHealth's shelf registration. UnitedHealth's Baa1 senior unsecured debt rating is based primarily on the company's strong business profile driven by its national presence and brand name, large membership base and its broad diverse product offerings.
The rating is also supported by a solid financial profile characterized by consistent earnings performance, a conservative and well diversified investment portfolio, and strong interest coverage from both regulated (UnitedHealthcare Insurance Co.; A2 insurance financial strength rating) and unregulated operations, offset to a degree by its moderate financial leverage and significant amount of goodwill and intangibles from numerous acquisitions over the last several years.
S&P assigned its 'A-' senior unsecured debt ratings to the issuance. The rating reflects UnitedHealth's very strong competitive position, strong earnings and cash flow profile, as well as its strong liquidity and financial flexibility, S&P says. The rating agency expects the offering proceeds to be used primarily for the refinancing of debt with first-quarter 2011 maturity dates.
A.M. Best has withdrawn the financial strength rating (FSR) of A (excellent) and issuer credit rating (ICR) of “a+” and assigned an NR-5 (not formally followed) to the FSR and an “nr” to the ICR of West Bend Mutual Group.
This rating action follows the sale of West Bend Mutual Insurance Co.’s (West Bend Mutual) majority owned subsidiary, Michigan Insurance Co. (MIC), to an unrelated party.
Following the sale of MIC, West Bend Mutual became a single entity no longer requiring a group rating. Currently, West Bend Mutual has an FSR of A (excellent) and an ICR of “a+”, which are unchanged. The outlook for both ratings is stable.
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