Moody's has affirmed its provisional shelf ratings (senior unsecured at (P) A3 of ACE Ltd. and its debt ratings (senior unsecured debt at A3) of ACE INA Holdings Inc. (ACE INA), which is unconditionally guaranteed by the group parent company, ACE Ltd.
The insurance financial strength (IFS) ratings of ACE's active property/casualty insurance operating subsidiaries have been upgraded to A1 from A2. Additionally, Moody's has affirmed the Aa3 IFS ratings of ACE's principal Bermuda-based operating subsidiaries, namely ACE Bermuda Insurance Ltd. and ACE Tempest Reinsurance Ltd. The outlook for all ratings is stable.
Moody’s says ACE has, over time, demonstrated a consistent, franchise-building strategy in the United States, Europe and in many diverse international markets, and has one of the leading global property/casualty insurance franchises. Additionally, management has generally maintained a strong level of organizational discipline, with respect to the deleveraging of the balance sheet over time, having adopted an enterprise risk management program—critical for an organization with operations in such diverse markets.
Moody's notes that ACE's ratings reflect its competitive positions in its principal business segments; its diversified spread of risk and internal liquidity; and its capitalization on a consolidated basis.
The following ratings have been affirmed with a stable outlook:
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The following ratings have been upgraded with a stable outlook.
Members of the ACE USA Group:
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Moody's has assigned an A2(hyb) rating to the 30-year subordinated bond to be issued by Allianz Finance II BV and guaranteed by Allianz SE (rated Aa3 for Insurer Financial Strength). The rating and hybrid indicator (hyb) are in line with existing subordinated debt issued or guaranteed by Allianz SE and consistent with Moody's standard notching practices for subordinated debt issued or guaranteed by insurance operating companies. The outlook is stable.
The €2,000 million benchmark subordinated debt issue will be utilized by Allianz for general corporate purposes, including potential funding of redemptions of existing debt. The new debt will qualify as regulatory capital under existing BaFin rules and is designed to qualify as Tier 2 debt under the forthcoming Solvency II regime due in 2013. The issuance is the largest publicly traded subordinated debt issuance by a European insurer for many years, and the coupon of 5.75% along with a book in excess of €5bn with more than 330 investors demonstrates Allianz's financial flexibility and market access.
The following rating has been assigned: EUR 2,000 mn 5.75% Subordinated Callable Bond due 2041 A2(hyb).
Moody's has assigned a Baa2 rating to CAD $375 million of senior unsecured debentures being issued by Aon Finance N.S.1, ULC (NSULC), based on an unconditional and irrevocable guarantee from Aon Corp. (senior unsecured debt rated Baa2, negative outlook). NSULC, an indirect, wholly owned subsidiary of Aon, was incorporated in Nova Scotia in 2004 to access the Canadian capital markets on behalf of various affiliates.
The debentures are being sold in various Canadian jurisdictions by way of a private placement to "accredited investors" under applicable securities legislation. Proceeds of the issue, which matures in March 2018, will be used to refinance a like amount of NSULC debentures maturing in April 2011. The rating outlook for NSULC is negative, matching that of Aon.
Aon's ratings reflect its strong market presence and its expertise in providing risk management solutions to middle-market, national and global clients, says Moody's. The ratings also reflect the firm's broad geographic and product diversification. These strengths are tempered by Aon's moderate, but improving, operating margins. Also, like other insurance brokers, Aon faces the challenges of a weak global economy, persistent soft pricing in the commercial property/casualty insurance market, and potential errors and omissions. The negative rating outlook reflects the large amount of debt issued by Aon in 2010 to help fund its acquisition of Hewitt Associates Inc. and the execution risk in that transaction.
Moody's has affirmed the debt ratings of Assurant Inc. (senior debt at Baa2), and the A3 insurance financial strength (IFS) ratings of the group's primary life and health insurance operating subsidiaries (Assurant L&H), but changed the outlook for these entities to negative from stable. In the same action, Moody's affirmed the IFS ratings of Assurant's primary P&C subsidiaries (Assurant P&C) at A2, with the outlook remaining stable.
The negative outlook at Assurant L&H is driven by the adverse consequences of recent national health care reform on the group's key individual and small group medical insurance businesses as well as weaker expected profitability in its employee benefits segment.
The stable outlook on Assurant P&C reflects the differing business dynamics of the P&C segment, such that difficulties at the affiliated life operation, due to healthcare reform, would be unlikely to lead to adverse affects on the P&C side.
The outlook for Assurant Inc. was changed to negative, due to concerns at Assurant L&H. Moody’s considers the P&C group, which has had strong results in recent years, to be the primary supporter of Assurant's debt obligations over the medium term. Assurant's existing ratings assume continued strong parent company liquidity, including cash held directly at the holding company, given that additional capital may be required at the company's operating subsidiaries in a stress scenario, such as a significant hurricane.
A.M. Best has affirmed the financial strength rating (FSR) of A++ (Superior) and issuer credit ratings (ICR) of “aa+” of the Chubb Group of Insurance Co.s (Chubb Group) and its property/casualty members. A.M. Best also has affirmed the ICR of “aa-”, senior debt ratings, junior subordinated debt, indicative ratings on securities, and the AMB-1+ on the commercial paper of Chubb Group’s publicly traded holding company, The Chubb Corp. (Chubb Corp).
A.M. Best has affirmed the FSR of A++ (Superior) and ICR of “aa+” of Chubb Atlantic Indemnity Ltd. (Chubb Atlantic). The outlook for all ratings is stable, except for the commercial paper, which does not have an outlook.
The ratings reflect Chubb Group’s risk-adjusted capitalization, underwriting and overall operating performance, and its specialty and upscale personal insurance businesses. The ratings also recognize Chubb Group’s comprehensive and proactive enterprise risk management, disciplined underwriting, strong franchise recognition and access to the capital markets through Chubb Corp.
The FSR of A++ (Superior) and ICRs of “aa+” have been affirmed for the Chubb Group of Insurance Cos. and its following property/casualty members:
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The following debt ratings have been affirmed.
The Chubb Corp.:
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A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of CNA Insurance Cos. (CNA) and its property/casualty members. A.M. Best has affirmed the ICR of “bbb” and debt ratings of CNA Financial Corp. (CNAF).
A.M. Best also has affirmed the FSR of A- (Excellent) and ICR of “a-” of CNAF’s life/health subsidiary, Continental Assurance Co. (CAC). The outlook for all ratings is stable.
At Dec. 31, 2010, CNAF’s adjusted debt plus preferred-to-total capital was 19.5%, which compares with 19.3% at year-end 2009 and 25.8% at year-end 2008 (including accumulated other comprehensive income). CNAF’s lower financial leverage at Dec. 31, 2009, as compared with year-end 2008, primarily reflects the substantial increase in the fair value of the company’s investments in 2009 and, to a lesser degree, operating earnings, which contributed to dramatically improved comprehensive income and stockholders’ equity. Adjusted financial leverage remained relatively flat in 2010, largely due to CNAF redeeming the remaining $1 billion of 10% cumulative senior perpetual preferred stock issued in 2008.
The FSR of A (Excellent) and ICRs of “a” have been affirmed for the following property/casualty members of the CNA Insurance Cos.:
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A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of CNA Surety Corp. Group (CNA Surety) and its members. A.M. Best has affirmed the ICR of “bbb” of its immediate parent, CNA Surety Corp. (SUR). The outlook for all ratings is stable.
The ratings reflect CNA Surety’s solid risk-adjusted capitalization, historically profitable operating results and leading market position in the contract and miscellaneous surety bond markets. These positive rating factors are derived from the group’s clearly defined target markets, extensive distribution network, disciplined underwriting and credit risk management and strong servicing capabilities.
The FSR of A (Excellent) and ICRs of “a” have been affirmed for CNA Surety
Corp. Group and its following members:
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Moody's has assigned Baa1 ratings to the $500 million in convertible senior notes, due in 2018, to be issued by Old Republic International Corp. Proceeds from the offerings are expected to be used to repay $107 million of senior unsecured debt the company assumed from its recent acquisition of PMA Cos. Inc., and for general corporate purposes, which could include capital contributions to Old Republic's insurance operating subsidiaries. The debt issuance is a drawdown from the company's shelf registration, filed March 2, 2011, to which Moody's also assigned a (P)Baa1 provisional senior unsecured shelf rating. The outlook on the ratings is stable.
Old Republic International Corp.'s debt ratings reflect the long-term, strong fundamental underwriting performance and low underwriting leverage at its property/casualty operations; conservative financial profile with a modest use of financial leverage and high cash coverage metrics; and good balance sheet strength with high-quality assets, liquidity and capitalization. Offsetting these strengths is a relatively modest market presence and scale in each of the company's business segments as well as substantial capital pressure at its mortgage insurance operation, due to declining housing prices and increased defaults.
Moody's notes that the pro forma financial leverage associated with the current offerings would result in Moody's-adjusted financial leverage of about 25% immediately following the offering, falling to about 24% once the PMA debt matures, which would be within tolerances for the company's financial flexibility and leverage metrics. In addition, the operating subsidiaries collectively will be able to dividend $307 million to the parent company in 2011 without prior regulatory approval.
S&P has assigned its 'BBB+' rating to Old Republic International Corp.'s (ORI) issuance of $500 million in convertible senior notes due in 2018. The issuance does not affect the 'BBB+' counterparty credit rating on ORI. The outlook on the company remains negative.
Net proceeds are expected to total about $539 million with the exercise of the overallotment. S&P expects that ORI will use about $107 million of the proceeds to repay some of the debt assumed through the merger with PMA Capital in 2010.
The outlook on ORI is negative, largely reflecting the weaknesses in the economic environment and the effects on the operating groups as well as the potential for an economic relapse. S&P applies normal notching (one full category; three notches) between the members of the Old Republic General Insurance Group and the holding company, ORI. The three-notch difference reflects ORI's dependence on dividends from ORG and regulators' abilities to prohibit those dividends.
Moody's has affirmed the A3 insurance financial strength (IFS) ratings of Penn National Insurance Group's operating subsidiaries and the Baa3 rating on the surplus notes issued by the lead company, Pennsylvania National Mutual Casualty Insurance Co. (Penn National Mutual). Moody's changed the outlook on the ratings to negative from stable following a significant reserve charge related to lead paint exposures as well as weaker prospective operating profitability.
For 2010, Penn National Insurance Group recorded a statutory net loss of $11 million and a combined ratio of 115.3%, compared to $29 million of statutory net income and 103%, respectively, in 2009. The reserve charge related to lead paint claims was about 8% of beginning year reserves for the group and was outside of Moody's expectations. Other concerns include rising accident year-combined ratios and the impact of high-frequency, low-severity catastrophe losses, particularly in its personal lines business. The company has implemented rate increases in its homeowners' line of business and personal auto lines of business; however, the commercial lines market remains highly competitive.
Penn National's ratings reflect the group's established position in smaller independent agency markets, historically consistent operating profitability, conservative balance sheet, and moderate exposure to natural and man-made catastrophes. These strengths are partly offset by intense competition in personal and small commercial lines insurance, significant geographic concentration as 41% of premiums come from Pennsylvania, significant weighting on long-tail risks which leads to more reserve uncertainty, and the company's modest scale, which limits its operating and financial flexibility.
The following ratings have been affirmed with a negative outlook:
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Fitch has placed Republic Mortgage Insurance Co.'s (RMIC) 'BBB-' Insurer Financial Strength (IFS) rating on Rating Watch Negative. The rating action is driven primarily by the continued erosion of capital and reserve levels at RMIC, which has been caused by continued losses and elevated delinquency levels. Fitch believes there is a high probability that RMIC's IFS will fall into the 'BB' category, upon the completion of a more detailed review of RMIC's recent performance during the next several weeks.
While Fitch recognizes that both reported losses and delinquent loan counts have improved during the past year, claim payments are likely to remain elevated for the foreseeable future, putting additional pressure on capital. The company's risk-to-capital ratio was 28.4:1 as of Dec. 31, 2010, up from 23.1:1 one year ago. This metric currently is the highest in the industry and is above the 25.0:1 level required by some state regulators. RMIC has negotiated waivers with its primary regulator in North Carolina and a number of other states that have a risk-to-capital requirement, and where the company continues to write new business.
