Following the announcement that ACE Ltd. and its subsidiaries (collectively, ACE) will acquire all of the outstanding common stock of Rain and Hail Insurance Service Inc. (R&H), Fitch Ratings and S&P affirmed its ratings. The transaction, roughly $1.1 billion cash, is expected to close by the end of 2010, pending necessary regulatory approvals.
Fitch has affirmed the issuer default rating (IDR) at 'A+' of ACE Ltd. The rating outlook is stable. Fitch's affirmation reflects its belief that ACE's capitalization will be materially unchanged by the acquisition, the integration risk derived from the transaction is manageable, and that R&H, the second-largest crop insurer in the United States, provides strategic benefits for ACE.
S&P affirmed its 'A-' counterparty credit rating on ACE Ltd. The rating agency affirmed its 'A+' counterparty credit and financial strength ratings on ACE's core operating subsidiaries. The outlook on all these companies remains positive. S&P contends that ACE's intended acquisition of Rain and Hail will significantly enhance its market position in the crop insurance segment.
Moody's assigned a (P)Baa2 provisional rating to the senior unsecured shelf of Alleghany Corp. and a Baa2 rating to the company's proposed $300 million offering of senior unsecured notes, due 2020. In the same action, Moody's assigned an A3 insurance financial strength (IFS) rating to RSUI Indemnity Co., Alleghany's lead insurance subsidiary. The outlook for the ratings is stable. Proceeds from the offering may be used for general corporate purposes, including, but not limited to, potential capital contributions to subsidiaries as well as potential future acquisitions, Moody’s says.
According to the rating agency, the A3 IFS rating for RSUI Indemnity Co. (RIC) is based on the company's sound capitalization, its strong investment profile and profitable underwriting track record (notwithstanding catastrophe-induced volatility), and its solid and consistent reinsurance panel.
Censtat Casualty Co.
A.M. Best has upgraded the issuer credit rating (ICR) to “bbb+” from “bbb” and affirmed the financial strength rating (FSR) of B++ (good) of Censtat Casualty Co. (CCC). The outlook for the ICR has been revised to stable from positive, and the outlook for the FSR is stable.
The upgrading of CCC’s ICR reflects the implicit support from its parent, Central States Health & Life Co. of Omaha (CSO), combined with CCC’s current and projected excellent level of risk-adjusted capitalization and profitable operations.
A.M. Best has assigned a FSR of A (excellent) and an ICR of “a” to CIGNA Health and Life Insurance Co. (CHLIC), a subsidiary of Connecticut General Life Insurance Co. (CGLIC), which is an indirect wholly owned subsidiary of CIGNA Corp. (CIGNA). The outlook assigned to both ratings is negative.
The ratings of CHLIC are based on its strong capital position and the implicit support of CGLIC, A.M. Best says. Additionally, the favorable rating implications include a transition plan to move selected CGLIC’s mid-sized market segment clients into CHLIC, along with the business growth from actively marketing new business beginning in 2011.
A.M. Best downgraded the FSR to C++ (marginal) from B- (fair) and ICR to “b” from ”bb-” of Farmers’ Mutual Insurance Co. (Farmers’ Mutual). The outlook for both ratings is negative.
The ratings reflect Farmers’ Mutual’s continued unfavorable operating performance trends that have caused surplus losses for five consecutive years, the rating agency says. In addition, Farmers’ Mutual’s geographic concentration of risk within the northern portion of the lower peninsula of Michigan exposes the company to frequent and severe weather-related events.
A.M. Best Co. has upgraded the FSR to A- (excellent) from B++ (good) and ICR to “a-” from “bbb+” of Florida Hospitality Mutual Insurance Co. (FHM). The outlook for both ratings has been revised to stable from positive.
The rating actions reflect FHM’s excellent capitalization, strong operating results over the recent 5-year period and solid presence within its established market segment. The positive attributes reflect the company’s focused underwriting and aggressive claims management, which has produced relatively solid underwriting results over the recent 5-year period, despite a significant reduction in workers’ compensation rates within
Florida since legislative reforms were passed in 2003.
Hingham Mutual Fire Insurance Co. and Danbury Insurance Co.
A.M. Best upgraded the FSR to A- (excellent) from B (fair) and ICR to “a-” from “bb” of Hingham Mutual Fire Insurance Co. and its subsidiary, Danbury Insurance Co. These ratings have been removed from under review with positive implications and assigned a stable outlook.
The rating actions follow the recent policyholder and regulatory approval of the participation of Hingham and Danbury in the intercompany pooling agreement of NLC Insurance Companies.
A.M. Best also affirmed the FSR of A- (excellent) and ICRs of “a-” for the new expanded pool, NLC Insurance Pool (formerly NLC Insurance Cos.), which consists of New London County Mutual Insurance Co., its subsidiary, Thames Insurance Co. Inc., Hingham and Danbury. The outlook for these ratings is stable.
The affirmations reflect that the addition of Hingham and Danbury into the intercompany pooling agreement will likely enhance the presence and distribution capability of NLC throughout its New England operating territory. Additionally, NLC’s strong capitalization will provide sufficient time to fully integrate the new operations without materially impacting the pool’s overall results or financial strength.
S&P lowered its counterparty credit and FSR on ING's U.S. insurance subsidiaries (ING Life Insurance and Annuity Co.; ING USA Annuity and Life Insurance Co.; Midwestern United Life Insurance Co.; ReliaStar Life Insurance Co.; ReliaStar Life Insurance Co. of New York; Security Life of Denver Insurance Co.; collectively known as ING U.S. Insurance) to 'A' from 'A+'. The outlook is negative.
The ratings on ING U.S. Insurance reflect S&P’s negative view of the group's prospective capital adequacy position based on our updated levels of stressed loss assumptions as outlined in our criteria for U.S. insurers. More specifically, it is the rating agency’s belief that ING U.S. Insurance's CMBS exposure within its investment portfolio could place a significant amount of pressure on the group's capital adequacy position in a stress scenario. Overall, the higher risk profile of ING U.S. Insurance's CMBS and variable annuities exposure has translated into a higher capital charge within our capital model. Our credit analysis also includes an assessment of the quality and level of ING U.S. Insurance's statutory operating earnings, new business strain, the favorable impact of the Alt-A transaction, and our view of the fungibility of capital within the ING group.
Moody's assigned a long-term debt rating of (P)Aa3 to the funding agreement-backed Global Medium Term Note (GMTN) program of MetLife Institutional Funding II (MLIF II). MLIF II is a special purpose statutory trust organized under the laws of the State of Delaware. Under the program, MLIF II may, from time to time, issue funding agreement-backed notes denominated in U.S. dollars or other currencies to U.S. institutional debt investors and non-U.S. investors.
The notes issued by MLIF II will be secured by funding agreement contract obligations issued by MetLife Insurance Company of Connecticut (MICC, Aa3 insurance financial strength (IFS) rating/negative outlook), an operating entity of MetLife Inc. (A3 senior unsecured debt/negative outlook), Moody’s says. The funding agreements will be held in trust for the benefit of the note holders.
A.M. Best downgraded the FSR to B++ (good) from A- (excellent) and ICR to “bbb” from “a-” of Standard Casualty Co. The outlook for both ratings is negative. Standard Casualty is a subsidiary of Palm Harbor Homes Inc., a manufacturer and marketer of factory built homes.
A.M. Best’s downgrading of Standard Casualty’s ratings is based on the continued deterioration in the capital position and financial performance of Palm Harbor, which in A.M. Best’s view is not consistent with a parent of an “A-” rated insurance company. The ratings and outlook also reflect the uncertainty in Palm Harbor’s credit facility, debt obligations and liquidity requirements, which may result in a potential burden on the insurance operations.
A.M. Best placed under review with positive implications the FSR of A- (excellent) and ICR of “a-” of Umialik Insurance Co., following the recent announcement by Western National Insurance Group (WNIG) that its flagship company, Western National Mutual Insurance Co. (Western National Mutual) has executed a definitive agreement to purchase 100% of the stock of Umialik from Ukpeagvik Inupiat Corp., an Alaska Native Corp. that owns various businesses.
Subsequent to the planned acquisition, Umialik is expected to be added into WNIG’s current pooling agreement among its six regional property/casualty insurance companies and become a member of the group, effective Jan. 1, 2011. WNIG currently has an FSR of A (excellent) and ICR of “a”, and both ratings have a stable outlook. WNIG currently serves personal and commercial customers in 10 states in the mid-western, northwestern and southwestern United States. The transaction is expected to close by year-end pending customary closing conditions, approval by Western National Mutual’s board of directors and regulatory authorities. Umialik’s ratings will be removed from under review following the addition of the company to WNIG’s pool and A.M. Best’s discussions with management.
A.M. Best assigned a debt rating of “a-” to the new offering of $300 million 5.375% 10-year senior unsecured notes of W. R. Berkley Corp. The assigned outlook is stable. The total net proceeds of $297.2 million from the offering may be used for general corporate purposes.
At June 30, 2010, W. R. Berkley’s unadjusted debt to capital (including trust preferred securities) stood at 30%, the midpoint of its target range of 25% to 35%. The company’s financial leverage has moderated in this range over the last couple of years, a noted decrease from several years ago. However, leverage has remained above industry peers.
With the inclusion of this new $300 million senior note issuance and the expected repayment of indebtedness coming due in 2010, W. R. Berkley’s proforma unadjusted debt to capital at year-end 2010 will increase to approximately 31%. While the competitive property/casualty operating environment will continue to place pressure on 2010 underwriting results, W. R. Berkley’s earnings are expected to remain solid, and its cash coverage ratios should remain supportive of the rating, A.M. Best says.
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