A.M. Best Co. has placed the financial strength rating (FSR) of A (excellent) and issuer credit rating (ICR) of “a” of Agri General Insurance Co. (AGIC) under review with positive implications. These rating actions follow the recent announcement that Rain and Hail Insurance Service Inc. (parent of AGIC) has entered into a definitive agreement to be acquired by Ace Limited. ACE Limited has agreed to purchase the 80% of Rain and Hail that it does not already own for $1.1 billion cash. Rain and Hail will continue to operate as a separate and distinct franchise within the company’s ACE Westchester division and Insurance-North America operations. The Rain and Hail management team will remain in place.
A.M. Best says the positive implications are based on the increased financial wherewithal and resources that will be available to AGIC as a result of the transaction and its affiliation with ACE Limited, which has approximately $21.4 billion in stockholders’ equity through Q2 2010. The ratings will remain under review pending the completion of the transaction, regulatory approvals and A.M. Best’s discussions with AGIC’s management. This transaction is expected to close by the end of 2010.
A.M. Best Co. affirmed the FSR of B++ (Good) and ICR of “bbb” of Asian Reinsurance Corp. (Asian Re). The outlook for both ratings is stable.
The ratings reflect Asian Re’s stable risk-adjusted capitalization, conservative and liquid investment portfolio and strong premium growth, A.M. Best says. The ratings also recognize the unique organizational structure and the immunities and privileges granted by country members to Asian Re.
Asian Re’s risk-adjusted capitalization, as demonstrated by Best’s Capital Adequacy Ratio (BCAR), has remained stable over the past four years, which was primarily due to the continuous capital injection by its new associate members since 2006. Although Asian Re’s underwriting risk is anticipated to increase due to further expansion into overseas markets, A.M. Best says its current risk-adjusted capitalization is adequate to support its forecasted premium growth.
Standard & Poor's revised its outlook on U.K.-based non-life insurer Congregational & General Insurance PLC to positive from stable. At the same time, its 'BB+' counterparty credit and insurer FSRs were affirmed.
"The outlook revision reflects Congregational & General's return to profitability ahead of our expectations," says S&P credit analyst Tatiana Grineva. "This enabled the company to rebuild its capital faster to a level where it can continue to operate and expand, thus supporting its competitive position and financial flexibility."
S&P says the ratings on Congregational & General continue to be constrained by its marginal competitive position and limited financial flexibility, while its capital base in absolute terms remains small. The rating agency asserts that the ratings are underpinned by its robust competitive position within its core, but very small, niche commercial property market, and by the improving operating performance. As its operating performance improves, so do its capitalization and financial flexibility, and that enables the company to expand and improve its competitive position going forward.
Endurance Specialty Holdings Ltd. and subsidiaries
Standard & Poor's announced that its ratings on Bermuda-based Endurance Specialty Holdings Ltd. and its operating subsidiaries are not affected by the acquisition of a portion of Glacier Reinsurance AG's international and U.S. property catastrophe and global specialty reinsurance business. Effective immediately, Endurance will reinsure select treaties within Glacier Re's portfolio on a quota share basis. In addition, the company will work with Glacier Re to renew these accounts and will pay commissions to Glacier Re contingent on the premiums written under the quota share treaty and the accounts being renewed.
This renewal rights acquisition is consistent with Endurance's strategy of expanding its international reinsurance book of business. S&P doesn't believe this transaction is a concern given that the company reviewed these accounts prior to the transaction and will not assume any prior-loss reserve liabilities. Furthermore, Endurance anticipates that this transaction will generate $25 million to $30 million of gross premiums written (GPW) per year, which constituted less than 2% of the company's 2009 GPW volume, S&P says.
Fitch Ratings upgraded Friends Provident Life and Pensions Ltd.'s (FPLP) insurer financial strength (IFS) rating of to 'A+' from 'A'. The outlook is stable.
The action follows the completion of the change of control of the majority of the UK businesses of Axa to Resolution Ltd. The relevant Axa companies and Friends Provident will be integrated over time under the branding of Friends Life. Fitch has simultaneously aligned the ratings of the Axa companies with those on FPLP.
Fitch says the combined entity as having significantly enhanced cash generation relative to FPLP. In part this reflects cash that will be generated by the reattributed estate of Axa Sun Life plc. Fitch views the acquired businesses as a good fit with the existing business and the increased operating scale as a positive factor. Capital is expected to be strong in the combined entity and leverage is commensurate with this new rating level.
Standard & Poor's corrected its outlook on the 'BBB' financial strength and counterparty credit ratings on Genworth Financial Mortgage Insurance Ltd. (GFMI Europe). The outlook is stable.
The rating and outlook on GFMI Europe is based upon an unconditional guarantee provided by its ultimate parent, Genworth Financial Inc. (GNW). As such, the ratings and outlooks for GNW and GFMI Europe are equalized. On May 6, 2010, the outlook on GNW was revised to stable from negative. Due to an administrative error, the revised stable outlook was not assigned to GFMI Europe.
Moody's Investors Service announced that it has affirmed the Baa2 senior debt rating of Infinity Property and Casualty Corp. and the A2 IFS ratings of its principal operating subsidiaries. The outlook for the ratings is stable.
The affirmation reflects the group's good financial profile including strong profitability and solid capital adequacy, Moody’s says. Infinity has an established franchise within the independent agency channel in non-standard automobile insurance, serving the Latino community, particularly in urban zones. Additional strengths, the agency says, include a high-quality investment portfolio, low reliance on reinsurance, a relatively low catastrophe risk profile, and solid reserve position as demonstrated by its long track record of favorable development.
Going forward, Moody's says it expects Infinity will demonstrate underwriting discipline in its core non-standard auto business by maintaining adequate pricing and controlling expenses, amidst competitive market conditions and sluggish macroeconomic trends.
Omega US Insurance Inc.
A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating of A- (excellent) and ICR of “a-” of Omega US Insurance Inc. The outlook for both ratings is stable.
The ratings of Omega Insurance Holdings Ltd. (Omega) (Bermuda) and its subsidiaries including Omega Specialty Insurance Company Limited (OSIL) and Omega US had been placed under review reflecting the uncertainty regarding Omega’s board composition, operational management and future strategy. Following the appointment of a new board and CEO and a wide-ranging review of Omega’s operations by the new chairman and CEO, A.M. Best says its concerns have been alleviated.
A.M. Best says the ratings of Omega US reflect its strong capitalization driven by its low underwriting leverage, efforts to maintain underwriting discipline and the explicit support provided by Omega in the form of capital infusions, subsequent to the initial capitalization of Omega US in 2007, and quota share reinsurance provided by OSIL. The ratings therefore reflect the implied continued support to be provided to Omega US by Omega in the future to support Omega US’ expansion in the United States. Omega US has faced notable challenges inherent in the operation of any company during its early stages, including the overall execution risk of its business plan in the highly competitive U.S. surplus lines sector.
Moody's Investors Service today affirmed the debt ratings of Protective Life Corp. and the A2 IFS rating of its operating subsidiaries, following the company's announcement that it had signed a definitive agreement to acquire United Investors Life Insurance Co. (UILIC) from Torchmark Corp. (senior debt at Baa1). Protective's rating outlook is stable. The transaction is expected to close in the fourth quarter of 2010, subject to regulatory approval.
Moody's says Protective's lead life insurance operating company, Protective Life Insurance Co. (PLICO), is expected to purchase UILIC for approximately $316 million in cash, including about $130 million in capital and surplus at UILIC following the removal of certain assets and liabilities prior to closing. The purchase price reflects approximately $56 million of statutory capital in excess of 350% NAIC risk-based capital. UILIC's closed block of individual term and universal life insurance and annuities, with about $1.4 billion in reserves, will become part of Protective's Acquisition segment.
Standard & Poor's too said that its 'AA-' insurer financial strength ratings on Protective Life Insurance Co. (PL), West Coast Life Insurance Co., and Protective Life and Annuity Insurance Co., and the 'A-' counterparty credit rating on Protective Life Corp. (PLC) remain unchanged after an announcement that PL will purchase United Investors Life.
Standard & Poor's revised its outlook on Selective Insurance Group Inc. (SIGI) and its operating subsidiaries to stable from negative. At the same time, the ratings firm affirmed its 'BBB' counterparty credit rating on SIGI and its 'A' counterparty credit and financial strength ratings on Selective.
"The rating actions reflect Selective's significantly improved capital adequacy from a year ago. The group's capital adequacy now meets our expectations," says S&P analyst Siddhartha Ghosh. "Selective's consolidated capital adequacy, as measured by our risk-based capital model, was redundant at the 'A' rating level as of year-end 2009. This compares favorably with a significantly deficient capital adequacy level at the end of 2008."
Also supporting the ratings are the company's strong competitive position in the small to medium regional markets in the Mid-Atlantic region, S&P says. Selective's strong agency relationship, predictive modeling capabilities for granular pricing and underwriting decisions, continuing price increases across most commercial and personal lines, and strong retentions all enhance its strong competitive position. Another factor supporting the rating is SIGI's strong financial flexibility, with conservative financial leverage of 19.9% as of June 30, 2010, compared with 23.5% at year-end 2009.
Fitch Ratings has affirmed Selective Insurance Group's ratings as follows:
- • Issuer Default Rating (IDR) at 'A-'
- • Senior debt at 'BBB+
- • Junior subordinated debt at 'BBB-'
• Fitch also affirmed the 'A+' IFS ratings of the members of the Selective intercompany pool. The rating outlook has been revised to stable from negative. A full rating list is shown below.
Fitch says the affirmation of Selective's ratings reflects the company's conservative balance sheet with very good capitalization and reserve strength and solid underwriting performance in line with peers. The ratings continue to reflect Selective's disciplined underwriting culture, strong independent agency relationships, strong loss reserve position, and improved diversification through continued efforts to reduce its concentration in New Jersey.
Moody's Investors Service today has placed on review for possible upgrade the A3 insurance financial strength (IFS) rating of United Investors Life Insurance Co.(UILIC), a wholly owned operating subsidiary of Torchmark Corp. The rating action follows the announcement by Protective Life Corp. of its proposed acquisition of UILIC for a purchase price of approximately $316 million, in a transaction due to close by year-end 2010, subject to regulatory approvals. The ratings of Torchmark and its other operating subsidiaries are unaffected by the acquisition as UILIC's revenue and income represent under 10% of Torchmark's consolidated GAAP results.
Commenting on the review for possible upgrade of UILIC's IFS rating, Moody's said that Protective's acquisition plans call for UILIC to be purchased by Protective's operating subsidiary, Protective Life Insurance Co., which is rated one notch higher than UILIC. Moody’s says Protective has a track record of acquiring closed blocks of inforce life insurance and entities like UILIC, integrating them into its business platform, and administering and supporting the acquired business. Upon completion of the transaction, Moody's expects that UILIC's IFS rating will be aligned with the IFS rating of Protective's operating subsidiaries.
Fitch Ratings placed the IFS rating of United Investors Life UILIC on rating watch negative. In addition, Fitch has affirmed the ratings and stable rating outlook of Torchmark Corp. (TMK) and its other insurance subsidiaries.
The rating action on UILIC is due to the announcement of its sale to Protective Life. Protective Life's IFS ratings are one notch lower than TMK's, and the rating watch reflects the likely migration of UILIC's ratings to those of Protective once the acquisition closes. Prior to closing, TMK is expected to remove capital from UILIC via a special dividend of investment securities that will bring UILIC's capital position to a lower level.
Standard & Poor's assigned its 'BBB-' rating on Unum Group's (UNM) issuance of 10-year, $400 million senior unsecured notes.
The ratings agency says UNM could issue up to $500 million in debt and its debt leverage and interest coverage metrics would remain within our expectations for the current rating. The insurer plans to use the proceeds to repay its $225 million senior notes due in March 2011 and for other general corporate purposes—possibly to fund pension plan expenses.
S&P says the rating is based on UNM's dominant market position, improved insurance risk profile, operating profitability, enhanced investment quality, and strong capitalization through statutory earnings. Offsetting these positive factors are somewhat slower growth rates across all sectors, risks that the extended economic recession will increase disability claims, and the historical volatility that UNM has experienced in its disability products.
Moody's Investors Service has assigned a Baa3 (stable outlook) senior unsecured debt rating to Unum Group's $400 million issuance of 10-year senior unsecured notes. The outlook on Unum is stable.
Moody's stated that the debt issuance is a draw on the company's shelf registration, which it filed in December 2008. Unum expects to use a portion of the proceeds to pre-fund $225 million of debt maturing in March 2011, Moody’s says. The balance of the proceeds will be used for general corporate purposes. Because Moody's expects that the portion of the issuance used to prefund the 2011 maturity will be held at the holding company and invested in high quality, short-term assets, that portion will be treated as operating debt and will be excluded from adjusted financial leverage. The rating agency expects financial leverage to remain in the low 20% range, which is in line with its expectation for Unum's current rating level.
A.M. Best also assigned a debt rating of “bbb-” to the forthcoming $400 million 5.625% senior unsecured notes to be issued on Sept. 15, 2010 of Unum Group. The rating outlook is positive.
Proceeds from the offering will be partially used to repay in full $225 million of 7.625% senior notes that mature March 2011, as well as for general corporate purposes.
White Mountains Insurance Group Ltd. and its subsidiaries
A.M. Best affirmed the FSR of A (excellent) and the ICR of “a” of the U.S. operating companies comprising OneBeacon Insurance Group and the FSR of A- (excellent) and ICRs of “a-” of the U.S. operating companies comprising Esurance Insurance Group.
Concurrently, A.M. Best affirmed the ICR of “bbb” of OneBeacon’s publicly traded parent, OneBeacon Insurance Group Ltd. and its intermediated holding company,
OneBeacon U.S. Holdings Inc. Additionally, A.M Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of White Mountains Reinsurance Company of America and the ICR of “bbb-” as well as the debt ratings of its intermediate parent holding company, White Mountains Re Group Ltd. A.M. Best also has affirmed the ICR of “bbb” and debt ratings of the group’s ultimate parent, White Mountains Insurance Group Ltd. The outlook for all ratings is stable.
White Mountains’ ratings reflect its strong financial flexibility and the solid operating results generated through its operating subsidiaries, A.M. Best says.
OneBeacon’s ratings reflect its sound risk-adjusted capitalization and strong earnings through its favorable underwriting and operating performance. The ratings also consider the financial flexibility of OneBeacon U.S. and OneBeacon Ltd. These positive rating factors are partially offset by OneBeacon’s weak underwriting and operating performance prior to 2003, largely related to adverse development on its run-off operations.
Esurance’s ratings recognize its solid risk-adjusted capitalization and the ongoing support of White Mountains. Offsetting these positive rating factors is the group’s high rate of premium growth, significant reinsurance dependence and continued underwriting losses (as it continues to invest in marketing to grow its policyholder base), which generate weak operating results relative to its personal auto peers.
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