A.M. Best Co. has placed under review with positive implications the financial strength rating (FSR) of B++ (Good) and issuer credit rating (ICR) of “bbb” of AAA Mid-Atlantic Insurance Group and its members.
This action follows the announcement on Nov. 16, 2010 of the signing of a definitive agreement on Oct. 15, 2010 between AAA Mid-Atlantic Inc. and California State Automobile Association Inter-Insurance Bureau (CSAA). CSAA has an FSR of A+ (Superior) and an ICR of “aa-”; both with a stable outlook.
The agreement stipulates that CSAA will purchase Keystone Insurance Co. and its wholly owned subsidiaries, AAA Mid-Atlantic Insurance Co. and AAA Mid-Atlantic Insurance Company of New Jersey from AAA Mid-Atlantic Inc. These companies constitute the AAA Mid-Atlantic Insurance Group.
The under review status reflects the strength of CSAA and its ability to support the members of the AAA Mid-Atlantic Group going forward. In conjunction with the purchase of these companies, CSAA also has acquired the producer agreements with Auto Club Partners Inc., which allows CSAA to transact business in the prior territories marketed by the AAA Mid-Atlantic Group. The under review status will remain until the transaction closes, as A.M. Best continues discussions with AAA Mid-Atlantic Group and CSAA’s managements regarding their plans going forward.
Moody's has affirmed AG Insurance's A2 insurance financial strength rating (IFSR) and the Baa3 issuer ratings of Ageas SA/NV and Ageas N.V. The ratings on guaranteed securities issued by Ageas Finance N.V., Ageas Hybrid Financing and Ageasfinlux were also affirmed. Furthermore, Moody's maintained the negative outlook on AG Insurance's rating, while the outlook on Ageas holdings' ratings was changed to negative from developing.
Moody's also announced that it will withdraw the provisional ratings on Ageas Finance N.V. MTN program for business reasons.
AG Insurance, Ageas SA/NV, Ageas N.V., Ageas Finance N.V., Ageas Hybrid Financing and Ageasfinlux did not participate in the credit rating process. The Rating Committee was not provided, for purposes of the rating, access to the books, records and other relevant internal documents of the rated entities or related third party.
Standard & Poor's said it revised its outlook on Allstate Corp. and its core property liability insurance companies to stable from negative. At the same time, S&P affirmed its 'A-' counterparty credit, 'A-2' commercial paper, and 'BBB' junior subordinated debt ratings on Allstate Corp. and its 'AA-' counterparty credit and financial strength ratings on the core property liability companies. In addition, the agency lowered its counterparty credit and financial strength ratings on Allstate Corp.'s life insurance companies to 'A+' from 'AA-', reflecting its reassessment of their strategic importance to the group. The outlook on the life insurance companies is stable.
"The ratings are based on Allstate's very strong competitive position and well-recognized franchise in the U.S. personal lines sector," said Standard & Poor's credit analyst Neil Stein. "The ratings also reflect the group's strong operating performance and very strong liquidity from strong operating cash flows—primarily resulting from the property liability operations and excess capital held at Allstate and its unregulated investment company, Kennett Capital Inc."
Offsetting these positive factors are capital adequacy that is deficient at the rating level as well as somewhat weakened financial flexibility resulting from an aggressive capital management strategy, S&P says. Rating weaknesses also include earnings volatility stemming from exposure to catastrophe and investment portfolio losses, competitive pressures associated with the standard auto book--because of catastrophe-reduction efforts in the homeowners book, and continued weak performance in the life segment.
A.M. Best Co. has affirmed the financial strength ratings (FSR) and issuer credit ratings (ICR) of the property/casualty and life/health insurance subsidiaries of Assurant Inc. Additionally, it affirmed the ICR of “bbb” and debt ratings of Assurant. The outlook for all ratings is stable.
Assurant’s ratings recognize the organization’s diverse business mix, established presence in numerous niche markets, strong operating results and solid overall capitalization. As of Sept. 30, 2010, Assurant’s unadjusted debt-to-capital and debt-to-tangible capital ratios were 15.5% and 18.1%, respectively, while maintaining a fixed interest coverage ratio that is well supportive of the ratings. Assurant also maintains a $500 million commercial paper program, which is 70% secured by a backup credit facility, as well as holding company capital of approximately $710 million at Sept. 30, 2010, and with no debt maturing until 2014, the organization maintains solid liquidity.
The ratings for Assurant Insurance Group, which includes seven member companies and composes Assurant’s property/casualty operations, reflect the group’s established presence in various specialty markets, continued favorable operating performance and adequate risk-adjusted capitalization.
Standard & Poor's placed its 'A-' counterparty credit and financial strength ratings on Clearwater Insurance Co. on CreditWatch with negative implications. Clearwater Insurance Co. is a subsidiary of Odyssey America Reinsurance Corp. (A-/Stable/--), which is ultimately owned by Toronto-based Fairfax Financial Holdings Ltd.
"We placed its ratings on Clearwater on CreditWatch with negative implications given that the company did not report any new premiums in the first nine months of 2010," said Standard & Poor's credit analyst Michael Gross. "The CreditWatch placement also reflects its questions about the insurer's prospective strategic importance to Odyssey Re and Fairfax in the context of its group methodology rating criteria."
Clearwater generated positive statutory net income of $4.1 million in 2009 and reported surplus of $696 million at year-end 2009. Statutory net income remained positive in the first nine months of 2010 at $5.9 million, and surplus increased to $739 million.
Moody's has affirmed the Aa1 insurance financial strength rating of General Reinsurance Corp. and its rated affiliates (General Re) and the Prime-1 rating for commercial paper of its immediate parent, General Re Corp. The outlook for the ratings is stable. General Re is owned by Berkshire Hathaway Inc. (Berkshire -- long-term issuer rating of Aa2, short-term issuer rating of Prime-1, stable outlook, NYSE: BRK-A).
According to Moody's, the Aa1 insurance financial strength ratings of General Re's principal operating subsidiaries reflect the company's strong market presence, its favorable underwriting results and profitability, its moderate operating leverage and its sound capital base. The insurance financial strength ratings also reflect the implicit and explicit support provided by Berkshire and certain Berkshire affiliates.
General Re's strengths are tempered by the competitive pressures in the global reinsurance market, the potential for adverse loss reserve development on long-tail casualty lines, the inherent volatility presented by catastrophe exposed business, and by its higher level of exposure to common and preferred equities and below-investment-grade bonds relative to its peers. While this investment style can add volatility to the company's earnings and capital base, Moody's notes that the potential impact of investment risk on the overall credit profile of General Re is somewhat mitigated by the firm's low operating and financial leverage metrics, as well by the implicit and explicit support provided by Berkshire.
Standard & Poor's assigned its 'BBB' rating on Genworth Financial Inc.'s (GNW) issuance of $400 million in senior notes.
The $400 million debt issuance is GNW's latest transaction in a string of capital-raising initiatives that have brought in approximately $2.4 billion in fresh capital to the holding company during the past 18 months. Some of the efforts to raise capital have resulted in $622 million in common equity, approximately $700 million in proceeds from the Canadian mortgage insurance IPO, and more than $1 billion in senior notes. S&P views this debt issuance favorably because GNW is expected to use the proceeds to fully repay the outstanding borrowings under the short-term credit facilities.
In May 2010, we revised its outlook on GNW to stable because of its bolstered cash and liquidity position, as well as the improved operating performance at the retirement and protection segment. In addition, notwithstanding the net losses within the U.S. mortgage insurance operations (USMI), S&P does not believe that GNW will need to support the USMI business with any capital infusions. Finally, although the fixed-charge coverage ratio is still at the low end of its expectations for the rating (about 3x), the agency thinks it will improve to 4x to 5x over the next 12 to 18 months.
Moody's has assigned a Baa3 (stable outlook) senior debt rating to the $400 million of 10-year fixed rate senior unsecured notes issued by Genworth.
The notes are a drawdown from a shelf registration filed in August 2009. Moody's expects Genworth to use the net proceeds from this offering, together with cash on hand, to repay in full the outstanding borrowings under its two five-year revolving credit facilities. These facilities will expire in May and August of 2012.
According to Moody's SVP, Scott Robinson, "The capital raise is another step that Genworth has taken to further improve the company's financial flexibility."
Fitch Ratings has affirmed its various ratings on Humana Inc. and subsidiaries following Humana's announcement that it has signed a definitive agreement to acquire Concentra, Inc. for approximately $790 million in cash. The Rating Outlook is Negative.
Fitch views the Concentra acquisition as a reasonable use of Humana's capital that will provide the company's membership and retail consumers with access to a variety of occupational medicine, urgent care and physical therapy services. The agency views Concentra's focus on health care delivery services as opposed to providing more traditional health insurance or managed care, as diversifying Humana's business platforms and product offerings.
Fitch believes that Concentra will contribute positively to key financial metrics such as earnings-based interest coverage and that the company will provide a sitsce of unregulated cash flows.
Fitch considers the transaction's $790 million purchase price to be large relative to recent acquisitions Humana has made. However, the agency notes that the company had $1.3 billion of holding company cash and short-term investments at Sept. 30, 2010 and it considers Humana's use of financial leverage to be reasonable. At Sept. 30, 2010, the company's debt-to-capital ratio was 19% (25% on a tangible capital basis). Humana's annual interest expense is relatively modest at approximately $100 million. Through the first nine months of 2010 the company's earnings-based interest coverage was approximately 21x and it has been strong in recent years approximating mid-teen levels.
National Guaranty Insurance Company of Vermont
A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of National Guaranty Insurance Company of Vermont (NGIC). The outlook for both ratings is stable.
The ratings reflect NGIC’s excellent capital position, consistently profitable operating performance, experienced management team and its parent company, Waste Management Inc.’s (WM) operational controls. Partially offsetting these positive rating factors is a large percentage of the captive’s surplus is loaned back to WM and is supported by a 24-hits demand note from WM. However, capital levels at NGIC are monitored by Vermont, and the company must maintain a certain aggregate exposure to capital ratio as prescribed by the Vermont Department of Banking, Insurance, Securities and Health Care Administration.
A.M. Best Co. has assigned debt ratings of “a-” to the newly issued senior unsecured notes of Prudential Financial Inc. (PFI). The securities were issued in two tranches: $500 million 4.50% 10-year notes and $500 million 6.20% 30-year notes. The notes were issued under PFI’s medium-term note program. The outlook assigned to the ratings is stable. The ratings on PFI’s domestic life/health insurance companies and existing debt securities are unchanged.
The proceeds from this debt issuance, in conjunction with the recent $1 billion equity raise and other internal cash resitsces, are expected to be used to fund PFI’s acquisition of Star Life Insurance Co. and Edison Life Insurance Co. from American International Group Inc. The acquisition is expected to close in Q1 2011, and is subject to satisfying regulatory requirements. This issuance is expected to have a minor impact on PFI’s financial leverage, which is within A.M. Best’s guidelines for its current ratings. A.M. Best notes that PFI’s use of operating leverage over the past several years has been reduced, and the new debt offerings will slightly dampen fixed charge coverage.
The ratings recognize the considerable diversity in PFI’s business mix within its insurance, investment and international divisions as well as its strong global market presence. Additionally, A.M. Best believes PFI and its operating subsidiaries maintain solid liquidity, which includes access to commercial paper programs, a newly committed bank credit facility and membership in the Federal Home Loan Bank of New York.
Moody's assigned a Baa2 debt rating (stable outlook) to the $1 billion of fixed rated senior unsecured notes issued by Prudential Financial. Half of the notes will mature in November 2020, with the remainder in November 2040. Proceeds from the debt issuance, a recent $1 billion equity issuance, along with $2.2 billion of on-balance sheet capital, will be used to fund the $4.2 billion acquisition of AIG Star Life Insurance Co. Ltd. (Star, unrated) and AIG Edison Life Insurance Co. (Edison, IFS rating of A1).
According to Moody's SVP Scott Robinson, "The Star/Edison acquisition further strengthens Prudential's market presence in Japan, diversifying its business mix away from the U.S. life insurance market."
In terms of the funding mix, Moody's notes that while the transaction uses up some of the company's excess capital and increases leverage slightly, Prudential remains well capitalized.
Moody's affirmed the A3 senior debt rating of RenaissanceRe Holdings Ltd. the A3 guaranteed senior debt rating of RenRe North America Holdings Inc. and the A1 insurance financial strength rating of Renaissance Reinsurance Ltd. All ratings have a stable outlook.
This rating action follows the announcement that RenRe has agreed to sell its U.S. insurance operations to QBE Holdings Inc. The aggregate purchase price will be the U.S. GAAP book value of the subject entities at year-end 2010, which is currently estimated by RenRe to be $275 million. Separately, RenRe announced that it plans to redeem all of its 7.30% Series B Preference Shares for an aggregate price of $100 million, plus accrued and unpaid dividends to Dec. 20, 2010.
Standard & Poor's said that it placed its 'A+' counterparty credit and financial strength ratings on Glencoe Insurance Ltd., Stonington Insurance Co., Lantana Insurance Ltd., and Stonington Lloyds Insurance Co., which are subsidiaries of RenaissanceRe Holdings Ltd., on CreditWatch with negative implications.
The rating action follows the announcement that RenaissanceRe has entered into a definitive agreement with QBE Holdings Inc. to sell its U.S. property/casualty business underwritten through managing general agents, its crop insurance business underwritten through Agro National Inc., and its commercial property insurance operation for year-end 2010 book value, currently estimated to be approximately $275 million, payable in cash at closing. The transaction is expected to close in the first half of 2011 and is subject to regulatory approvals.
"The CreditWatch placement reflects its view that we could either affirm or lower the ratings on Glencoe Insurance Ltd., Stonington Insurance Co., Lantana Insurance Ltd., and Stonington Lloyd's Insurance Co.," said Standard & Poor's credit analyst Taoufik Gharib. "The ratings on RenaissanceRe Holdings Ltd. and its other subsidiaries are not affected by this transaction."
Moody's assigned a Baa3 rating to approximately $250 million of senior unsecured notes, due 2015, to be issued by Unitrin Inc. The senior notes offering constitutes a drawdown from Unitrin's existing shelf registration (provisional senior unsecured debt at (P)Baa3). Moody’s expects the net proceeds to be used for general corporate purposes, including pay down of the outstanding balance of the company's revolving credit facility. The outlook for the rating is stable.
Unitrin's ratings are based on the diversified revenue and earnings of its property/casualty and life operations, and the group's improved capital position, financial flexibility and liquidity profile, Moody's says. The P&C operation, led by Trinity Universal Insurance Co., has a good personal lines franchise with a fairly broad geographic distribution, good asset quality, sound reserve position and adequate risk adjusted capitalization. These strengths are somewhat offset by the group's limited scale, exposure to natural catastrophes, somewhat volatile earnings, and unprofitable operating results from its direct operation. The company has implemented a number of initiatives aimed at improving rate adequacy and risk selection across the P&C group.
Unitrin's life operation, led by United Insurance Company of America, has a good position in the home service insurance business, a well-established career agent distribution force, and the consistent profitability of the home service insurance business. Somewhat mitigating these strengths are: the company's modest market presence, franchise, and brand in the overall life insurance market; and limited growth opportunities in the declining home service insurance business. The home service business has been in a slow, steady decline in the U.S. for many years, which is evidenced by sluggish revenue growth. This business services a large, underserved portion of the U.S. population that most insurance providers find uneconomical.
A.M. Best Europe has upgraded the financial strength rating (FSR) to A+ (Superior) from A (Excellent) and issuer credit rating (ICR) to “aa-” from “a+” of Zurich Insurance Co. Ltd. (ZIC), the main operating company of Zurich Financial Services Ltd. (Zurich). Concurrently, A.M. Best upgraded the ratings of the debt instruments issued or guaranteed by ZIC and assigned a rating of “a” to the CHF 700 million subordinated perpetual notes recently issued by ZIC under its Euro medium-term note program. A.M. Best also affirmed the ICR of “a” and the related debt ratings of Zurich. The outlook for all the ratings remains stable.
The upgrade of ZIC’s ratings reflects anticipated improvement in consolidated risk-adjusted capitalization at year-end 2010, which will further build on strengthening achieved in 2009. A.M. Best anticipates that Zurich’s enhanced risk-adjusted capitalization will be maintained into 2011 and beyond. Capitalization is likely to be supported by stable consolidated reserves.
A.M. Best Co. has upgraded the financial strength rating (FSR) to A+ (Superior) from A (Excellent) and issuer credit ratings (ICR) to “aa-” from “a+” of the U.S. subsidiaries of ZIC, including the lead company of the U.S. group, Zurich American Insurance Co. (Zurich US) and its rated property/casualty pooling affiliates. The outlook for all ratings is stable.
The ratings reflect the improved underwriting and operating performance of Zurich US in recent years, particularly on an accident year basis, as well as the strong level of risk-adjusted capitalization and enterprise risk management practices that have strengthened the organization as a whole. Additional positive factors include the enhanced profile of the group as one of the top five writers of property/casualty insurance in the United
States, giving it market leadership in many of its key product lines and territories. The implicit support of ZIC and the strategic importance of the parent’s U.S. operations to the worldwide operations of the group are key drivers of the rating upgrades.
Notwithstanding relatively poor earnings prior to 2007 (driven by adverse loss reserve development and under priced business written in prior years), reserve development for
Zurich US has improved in recent years across most lines, with accident year results now more comparable with the commercial casualty industry composite. The rating outlook recognizes A.M. Best’s view that current earnings will be sustainable in the medium term.
The FSR has been upgraded to A+ (Superior) from A (Excellent) and the ICRs to “aa-” from “a+” with a stable outlook for Zurich American Insurance Co. and its following property/casualty pooling affiliates:
- * Fidelity and Deposit Company of Maryland
- * Empire Fire and Marine Insurance Co.
- * Empire Indemnity Insurance Co.
- * Universal Underwriters Insurance Co.
- * Assurance Company of America
- * Maryland Casualty Co.
- * Northern Insurance Company of New York
- * American Guarantee and Liability Insurance Co.
- * American Zurich Insurance Co.
- * Universal Underwriters of Texas Insurance Co.
- * Steadfast Insurance Co.
- * Zurich American Insurance Company of Illinois
- * Colonial American Casualty & Surety Co.
