Fitch Ratings affirmed all ratings of Aetna Inc. and its operating subsidiaries. The rating outlook remains negative.
Aetna’s ratings are supported by the company’s strong cash flow, strong competitive position and solid balance sheet, Fitch says. The negative rating outlook reflects uncertainty related to health care reform and its ultimate impact on all health and managed care companies.
Also considered within Aetna’s ratings is the longer-term potential related to cash funding needs of its employee retirement plans, as well as a long-term weakening trend in interest coverage levels. Fitch believes current levels remain adequate for the ratings and anticipates no further weakening from recent results.
Fitch revised the outlooks on Germany-based Allianz SE's insurer financial strength (IFS) rating and long-term issuer default rating (IDR) to stable from negative. The IFS rating and IDR have been affirmed at 'AA-', respectively. At the same time, the main Allianz subsidiaries have been affirmed at IFS 'AA'.
All outstanding senior notes from Allianz Finance II B.V. (Allianz Finance) have been affirmed at 'AA-' and subordinated notes from Allianz Finance and Allianz SE at 'A'. The EUR1.5bn 5.5% subordinated note issued by Allianz SE is affirmed at 'A-'. The one notch lower rating takes account of a loss absorption trigger that in Fitch's opinion is relatively easily triggered. In addition, Fitch assigned Allianz Finance's EUR1.5bn 4.75% senior notes a 'AA-' rating. Allianz SE guarantees the bond.
The revision of the rating outlook reflects Fitch's view that the Allianz group (Allianz) has, in general, coped well with the global financial crisis and improved earnings substantially in the past 12 months. Allianz's ratings reflect the group's strong underlying technical profitability, very strong and improved consolidated group capital position, very strong diversification by geography and by product, and solid business position in its key markets, the rating agency says.
Cincinnati Financial Corp. and operating companies
S&P lowered its counterparty credit and financial strength ratings (FSR) on Cincinnati Financial Corp.'s operating insurance companies, collectively referred to as CIC, to 'A' from 'A+'. At the same time, the rating agency lowered its counterparty credit rating on Cincinnati Financial Corp. to 'BBB' from 'BBB+'. The outlook on all of the companies is stable.
The action reflects the recent decline in CIC's earnings and the substantial deterioration of underwriting performance from historical levels, according to S&P. Offsetting these factors are the group's very strong capitalization and strong competitive position, which is supported by a very loyal and productive independent agency force and a low-cost infrastructure.
As of year-end 2009, CIC's capitalization was very strong on a risk-adjusted basis. The rating agency believes that the capital level is stabilizing and that the group's ongoing efforts to assess its overall risks through an improved enterprise risk-management program will result in further stabilization.
CNA Financial Corp. and subsidiaries
Fitch and S&P react to CNA Financial Corp.'s (CNA) agreement to transfer its asbestos and environmental (A&E) pollution liabilities to National Indemnity Co. (NICO).
Fitch says this does not affect the IDR on CNA (‘BBB-’) or IFS on its property/casualty insurance subsidiaries (‘A-’). The rating outlook remains stable. CNA does not participate in the rating process other than through the medium of its public disclosure, and as such Fitch will review any additional details of this transaction as they become publicly available. In particular, Fitch will evaluate the economics driving CNA to enter into this agreement, as Fitch has generally seen improving trends in the A&E environment in recent years.
S&P said that the ratings on CNA (BBB-/stable/--) and its core insurance operating companies (A-/stable/--) are unaffected by the company's agreement with NICO (AA+/stable/--).
The reinsurance agreement transfers potential adverse reserve risk for liabilities that are highly correlated with an uncertain and volatile legal environment surrounding asbestos and environmental claims, thereby reducing CNA's reserve risk, S&P says. Furthermore, the rating agency expects capitalization and financial leverage metrics to remain consistent with expectations following the close of the transaction.
A.M. Best Co. downgraded the FSR to B++ (good) from A- (excellent) and the issuer credit rating (ICR) to “bbb” from “a-” of Consumer Insurance Services Limited (CISL). The outlook for both ratings is stable.
The ratings reflect CISL’s consistent operating profitability and consider the reorganization within Fisher & Paykel Finance Holdings Limited (F&P Finance) and its impact on CISL’s financial prospects and business profile.
CISL’s consistent operating performance is supported by a good underwriting margin, relatively stable claims experience and improving expense measures, A.M. Best says.
Moody's affirmed the ratings of HMSC Corp. (HMSC—corporate family rating of B3), the holding company for the Swett & Crawford Group, in light of the company's combination with UK-based Cooper Gay to form one of the world's largest wholesale and reinsurance brokers.
The combined group places approximately $3.5 billion of premiums annually in the U.S., London and international insurance markets. The business combination does not change HMSC's debt structure, although it benefits creditors by offering more attractive scenarios for repaying or refinancing the debt, which matures in 2014.
Moody’s says the combination will help offset pressures in the U.S. wholesale brokerage market.
Fitch affirmed Lloyd's of London's (Lloyd's) IFS rating at 'A+'. Fitch has also affirmed the Society of Lloyd's Long-term IDR at 'A', and affirmed Lloyd's Reinsurance Co. (China) Ltd.'s IFS rating at 'A+'. All three ratings have stable outlooks. Fitch has additionally affirmed Lloyd's subordinated debt issues, as detailed at the end of this comment, at 'BBB+'.
The rating affirmation reflects Lloyd's strong operating performance during 2009, with reported results ahead of Fitch's expectations. The agency notes that Lloyd's 2009 performance was supported by a series of beneficial factors that are unlikely to be repeated in 2010.
The stable outlook reflects Fitch's expectation that 2010 will prove to be a more challenging year for Lloyd's.
S&P revised its outlook on MTL Insurance Co. to stable from negative. At the same time, the rating agency affirmed its 'A' counterparty credit and FSRs on the company.
The stable outlook is based on the company's strong competitive position and very strong capitalization, S&P says. Over the past 18 months, total adjusted capital has increased about $9 million to $114 million. Investment losses have not materialized as the rating agency had expected, and statutory earnings exceeded expectations because of slower sales in 2009.
National American Insurance Co. and Chandler (USA) Inc.
A.M. Best upgraded the FSR to B++ (good) from B+ (good) and ICR to “bbb” from “bbb-” of National American Insurance Co. (NAICO). Concurrently, A.M. Best upgraded the ICR to “bb” from “bb-”and debt rating to “bb” from “bb-” on $24 million 8.75% senior unsecured debentures due 2014 (of which $7 million remains) of NAICO’s parent, Chandler (USA) Inc. (Chandler). The outlook for all ratings is stable.
The ratings reflect NAICO’s strong risk-adjusted capitalization, improved operating performance and long-standing regional market presence. The improvement is due in part to management’s corrective actions over the years, including significantly increasing rates, reducing exposures, improving risk selection and tightening policy terms and conditions, the rating agency says.
Penn National Insurance and its members
A.M. Best affirmed the FSR of A- (excellent) and ICR of “a-” of Penn National Insurance (Penn National) and its members. The three members of the group are Pennsylvania National Mutual Casualty Insurance Co. (Penn Mutual), Penn National Security Insurance Co. (Penn Security) and Founders Insurance Co. (Founders). Concurrently, A.M. Best affirmed the debt rating of “bbb” on $50 million, 9.5% surplus notes issued by Penn Mutual. This 30-year subordinated debenture is due in 2034. The outlook for all ratings is stable.
The ratings reflect the group's excellent risk-adjusted capitalization, organic surplus growth achieved through profitable operating performance, and resulting improvement in underwriting leverage measures, A.M. Best says. The ratings also consider management's evolving risk management practices and rollout of predictive analytics, which is expected to enhance loss experience.
Willis North America Inc., Willis Group Holdings PLC and Trinity Acquisition Limited
Fitch affirmed its IDRs at ‘BBB-‘ on Willis North America Inc. (WNA), Willis Group Holdings PLC (Willis) and Trinity Acquisition Limited and revised the rating outlook for these entities to stable from negative.
Fitch also affirmed WNA’s $350 million senior unsecured notes due 2015, $600 million senior unsecured notes due 2017 and $250 million 7.00% senior debt due 2019 all at ‘BBB-’. And Trinity’s $500 million senior unsecured notes due 2016 are affirmed at 'BBB-'.
The stable rating outlook reflects that since acquiring Hilb Rogal & Hobbs Co. (HRH) in late 2008, Willis has lowered its debt-to-EBITDA ratio, Fitch says. Moreover, since completing the HRH acquisition, Willis has significantly reduced its near term liquidity risk by successfully paying down or refinancing the 364-day interim loan facility used to help finance the transaction and by eliminating the equity put option held by external investors in the company's minority-owned associate, Gras Savoye.
Finally, Fitch notes that despite challenging market conditions, Willis has sustained its operating performance in the aftermath of the HRH acquisition at levels that approximate recent results.
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