A.M. Best upgraded the financial strength rating (FSR) to B++ (good) from B+ (good) and issuer credit rating (ICR) to “bbb” from “bbb-” of 1st Auto & Casualty Insurance Co. (1st Auto). These rating actions are based on 1st Auto’s recently becoming a member of the rating unit, Wisconsin Reinsurance Group. A.M. Best also affirmed the FSR of B++ (good) and the ICRs of “bbb” of Wisconsin Reinsurance Group and its member, Wisconsin Reinsurance Corp. The outlook for all ratings is stable.
The upgrade to the ratings recognizes that 1st Auto is an integral part of the group’s overall strategy, accounting for over 30% of its net written premiums and is a significant contributor to the group’s earnings, A.M. Best says. 1st Auto’s products are marketed through agents who are representatives of mutual insurance companies that are clients of Wisconsin Reinsurance Corp.
S&P withdrew its 'D' counterparty credit rating and its 'R' financial strength and financial enhancement ratings on Ambac Assurance Corp. (Ambac). S&P also said it withdrew its 'D' counterparty credit and long-term debt ratings on Ambac Financial Group Inc. (Ambac Financial). In addition, the rating agency withdrew its 'CC' financial strength and financial enhancement ratings on Everspan Financial Guarantee Corp. (Everspan).
These actions were made at the company's request, combined with a lack of sufficient information following the bankruptcy filing of Ambac Financial and the regulatory intervention of Ambac, S&P says. The 'R' ratings on Ambac reflected the ongoing rehabilitation process that began in March 2010. Following a directive by the Commissioner of Insurance of the State of Wisconsin, Ambac established a segregated account for certain insured exposure, primarily policies related to credit derivatives, residential mortgage-backed securities, and other structured finance transactions. S&P views the regulatory directive with respect to the segregated account indicates a level of regulatory intervention at Ambac that is consistent with an 'R' rating. The 'D' ratings on Ambac Financial reflected its filing bankruptcy under Chapter 11 of the U.S. Bankruptcy on Nov. 8, 2010. S&P assigned a 'D' rating to issuers and issues upon the filing. The 'CC' ratings on Everspan were based on a support agreement from Ambac. The rating also reflected Everspan not being under regulatory control.
Moody’s and S&P assigned ratings to American International Group Inc.'s (AIG) $500 million senior unsecured fixed-rate debt due Dec. 15, 2014 and $1.5 billion senior unsecured fixed-rate debt due Dec. 15, 2020.
Moody's assigned an A3 rating to $2 billion of senior unsecured notes being issued by AIG. AIG is issuing $500 million of three-year notes and $1.5 billion of 10-year notes off its "well-known seasoned issuer" shelf registration. Proceeds will be used for general corporate purposes, including investing in liquid assets at the parent company. The rating outlook for AIG and its core insurance operations remains negative.
The current ratings of AIG and its core insurance businesses incorporate the benefits of government ownership and support, according to Moody's. Specifically, the Aa3 insurance financial strength (IFS) rating of Chartis U.S. incorporates one notch of uplift versus its intrinsic credit profile, as does the A1 IFS rating of SunAmerica Financial Group (SFG). AIG's A3 senior unsecured debt rating is notched downward from the supported IFS ratings, reflecting the parent's structural subordination. The government support also offsets the downward rating pressure from noncore businesses with weaker credit profiles, Moody’s says.
Moody's cited the following factors that could lead to a stable rating outlook for AIG: (i) improvement in the intrinsic credit profiles of Chartis and SFG, (ii) exiting or substantially de-risking noncore businesses, (iii) maintenance of robust liquidity within the major operations and at the parent company, and (iv) a stand-alone capital structure that is consistent with the current ratings (e.g., adjusted financial leverage in the range of 20%-30% with pretax interest coverage in mid-to-high single digits).
S&P assigned its 'A-' rating to AIG’s $500 million senior unsecured fixed-rate debt and $1.5 billion senior unsecured fixed-rate debt. At the same time it also affirmed the 'A-' counterparty credit on AIG, and the 'A+' counterparty credit and financial strength ratings on its core Chartis and SunAmerica insurance operating companies. The outlook on these companies remains negative.
S&P views AIG's senior unsecured fixed-rate debt issuance as neutral for the current rating and expect that AIG will use the proceeds from the sale for general corporate purposes. The continuation of the negative outlooks on both AIG and Chartis and SunAmerica Financial Group reflects the rating agency’s view of the execution risk of the restructuring and recapitalization plan announced on Sept. 30, 2010, and uncertainty regarding the operating performance of the insurance operations, primarily within Chartis Insurance.
A.M. Best assigned a FSR of A (excellent) and an ICR of “a” to Aspen American Insurance Company (AAIC) a wholly owned subsidiary of its ultimate parent, Aspen Insurance Holdings Ltd. (Aspen). The outlook assigned to both ratings is stable.
The ratings of AAIC largely reflect its role and strategic importance to Aspen’s overall U.S. strategy and the explicit support provided through substantial quota share reinsurance of AAIC’s net business by its Bermuda-based affiliate, Aspen Insurance Ltd. (AIL), A.M. Best says. Additionally, AIL provides a guarantee of all of AAIC’s third-party reinsurance recoverables. The ratings also reflect A.M. Best’s expectation concerning the company’s ability to successfully execute a business plan targeting specific, identified programs focused on certain niche classes of specialty admitted business.
Moody's affirmed the insurance financial strength ratings of Aspen Insurance UK Limited and Aspen Insurance Limited (both A2), and the debt ratings (Baa2 senior, Ba1 preferred) of Aspen Insurance Holdings Limited. The rating outlook is stable.
The rating affirmation reflects the Aspen Group's (Aspen) very good capitalization, conservative investment policy, and relatively low financial leverage, according to Moody’s. Whilst recognizing Aspen's good profitability record and good business diversification, these strengths are off-set by the inherent volatility and cyclicality in many of its lines of business, the inherent uncertainty associated with expanding into new lines of business, and the challenge of improving the performance of its U.S. insurance division's business.
A.M. Best Europe – Rating Services Limited revised the outlook to positive from stable and affirmed the ICR of “a-” of the non-operating holding company, Aviva plc (Aviva). The FSR of A (excellent) and ICR of “a+” has been affirmed for Delta Lloyd NV (Netherlands). The outlook for these ratings is stable. A.M. Best also revised the outlook to positive from stable and affirmed the FSR of A (excellent) and the ICRs of “a+” of the remaining subsidiary companies of Aviva. A.M. Best also has revised the outlook to positive from stable and affirmed the debt securities issued by Aviva.
The change in outlook reflects Aviva’s improved risk-adjusted capitalization and recognizes the improvements in its financial results over 2009 and through 2010, resulting from improved market conditions, management initiatives and the group’s diversified business model.
A.M. Best has affirmed the FSR of A (excellent) and ICR of “a+” of Aviva Life and Annuity Co. (ALAC) and its wholly owned subsidiary, Aviva Life and Annuity Company of New York (ALACNY) (together, known as Aviva USA). These companies are the principal insurance subsidiaries of Aviva USA Corp., which is an indirect, wholly owned subsidiary of Aviva plc (Aviva).
Concurrently, A.M. Best affirmed the ICR of “bbb+” of Aviva USA Corp. and its remaining senior debt of “bbb+” that was assumed with the acquisition of AmerUs Group Co. (AmerUs). A.M. Best also affirmed the debt rating of “a-” on $25 million 8.66% surplus notes, due 2011 of ALAC. The outlook for all ratings has been revised to positive from stable.
The revised outlook of Aviva USA reflects the improved financial performance and risk-adjusted capital of its ultimate parent, Aviva, the rating agency says. Because Aviva USA’s ratings are inherently tied to those of its ultimate parent, the positive outlook reflects the rating outlook for Aviva.
A.M. Best assigned a debt rating of “bbb+” to the recently announced CAD 250 million 3.65% non-cumulative five-year rate reset first preferred shares, Series N of Great-West Lifeco Inc. (Great-West). The assigned outlook is stable. All other ratings are unaffected.
The proceeds from the preferred share offering will be utilized for general corporate purposes by Great-West, including augmenting its liquidity positions. A.M. Best notes that Great-West’s financial leverage is in the 25% range, which is within the guidelines that support its current ratings. Additionally, Great-West’s interest coverage and fixed charge coverage remain within A.M. Best’s expectations for the current rating level.
The rating reflects Great-West’s very strong market position in its core business lines, historically strong operating fundamentals and favorable financial performance. Great-West’s diversified insurance, reinsurance and financial services operations, along with its strong enterprise risk management capabilities have enabled it to manage through recent adverse economic conditions with only a modest impact to its overall performance and financial strength.
S&P revised its outlook on Iowa-based Principal Life Insurance Co. and Principal National Life Insurance Co. (collectively known as Principal Life) to positive from stable on the expectations that Principal Life's capital adequacy position as measured by S&P’s model, the firm's statutory earnings capacity over a two-year horizon, and to a lesser degree, the level of net cash maintained at the holding company would become sufficient to cover the capital deficit implied by our 2010 U.S. asset stress test. At the same time, the rating agency affirmed its ratings on Principal Life.
The outlook revision is based on the expectation that Principal Life's capital adequacy deficiency as measured by S&P’s 2010 U.S. asset stress test will diminish over the course of time. The company's capital deficit—as measured by S&P’s stress model—is buoyed by the group's solid competitive position and earnings profile, which has demonstrated notable strength and resiliency through the financial crisis, the very strong operating company liquidity and tight asset-liability management, and the holding company cash position.
S&P’s 'AA/Stable' insurer financial strength rating on Progressive Direct Insurance (Australian Branch) has been withdrawn at the request of the company. Progressive Direct Insurance Co. is a subsidiary of Progressive Corp. The Australian branch was initially rated on Dec. 8, 2009.
A.M. Best withdrew the FSR of A (excellent) and ICR of “a” of Travelers Auto Insurance Co. of New Jersey (TAIC-NJ) and Travelers of New Jersey Group and has assigned an NR-5 (Not Formally Followed) to the FSRs and an “nr” to the ICRs.
Effective Nov. 1, 2010, TAIC-NJ was merged with and into an affiliate, Fidelity and Guaranty Insurance Underwriters, Inc. (Fidelity). TAIC-NJ and First Trenton Indemnity Company (First Trenton) were the sole members of Travelers of New Jersey Group. The personal lines business formerly written by TAIC-NJ will now be directly written by Fidelity. This book of business will continue to be reinsured to First Trenton through a 100% quota share agreement.
Consequently, A.M. Best affirmed the FSR of A (excellent) and ICR of “a” with a stable outlook for First Trenton, which is now rated on a stand-alone basis. First Trenton’s ratings reflect its adequate risk-adjusted capitalization, historically strong operating performance and the benefits derived from its local market presence as a provider of personal lines coverages in New Jersey. The ratings also reflect the operational support and financial flexibility afforded by Travelers Group and its ultimate parent, The Travelers Companies Inc.
A.M. Best downgraded the FSR to B+ (good) from B++ (good) and ICR to “bbb-” from “bbb” of Upland Mutual Insurance Inc. (Upland), The outlook for both ratings is stable.
The rating actions reflect Upland’s trend of declining risk-adjusted capitalization driven by significant underwriting losses and negative operating income over the last few years. The operating losses experienced exemplify Upland's geographic concentration of risk as a single state property writer in Kansas, which exposes the company to tornado and wind and hail storm losses. Currently, the modeled 100 year net after-tax probable maximum loss estimate represents a significant percentage of the company’s policyholders’ surplus. As a result of the storm frequency in 2008, 2009 and 2010 in Kansas, Upland’s surplus declined approximately 20%.
