A.M. Best has affirmed the financial strength rating of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of American Family Life Assurance Co. of Columbus, American Family Life Assurance Co. of Columbus (Japan Branch), its wholly owned subsidiary, American Family Life Assurance Co. of New York and Continental American Insurance Co.
Concurrently, A.M. Best has affirmed the ICR of “a-” and all existing debt ratings of the ultimate parent, Aflac Inc. (Aflac). The outlook for all ratings is stable.
Aflac’s ratings reflect its continued strong profitable operating results, solid capital position and strong brand recognition in Japan and the United States. Aflac’s financial leverage remains below 25%, which is consistent with its current ratings. In addition, Aflac’s management has implemented an initiative to methodically reduce the risk in its investment portfolio.
A.M. Best has affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit rating of “a-” of EMC Insurance Co. (EMC) and its seven property and casualty insurance company affiliates, which operate under an inter-company pooling agreement led by Employers Mutual Casualty Co. (EMCC) and EMC Reinsurance Co. (EMC Re), a reinsurance company owned indirectly by EMCC.
Concurrently, A.M. Best has affirmed the ICR of “bbb-” of EMC Insurance Group Inc., a downstream holding company majority owned by EMCC and the immediate parent of EMC Re. The outlook for all ratings is positive.
The ratings of EMC and EMC Re reflect their strong level of risk-adjusted capital, which is supported by the consistent generation of pre-tax operating and net income; favorable development of prior years’ loss and loss adjustment expense reserves in recent years; generally favorable core underwriting results; and the benefits the companies will continue to derive from pricing, risk selection and claims actions taken in recent years.
A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of Farmers Insurance Group (Farmers) and its members.
Concurrently, A.M. Best has affirmed the debt ratings on the outstanding surplus notes of Farmers Insurance Exchange and Farmers Exchange Capital, and the ICR of “a” of Farmers’ management company and attorney-in-fact, Farmers Group Inc. (FGI). The outlook for all ratings is stable.
In addition, A.M. Best has withdrawn the ICR of “a” and FSR of A of Foremost Corp. Group, as the members are now rated as part of Farmers.
The ratings reflect Farmers’ market leadership position, prudent risk-management efforts, strong risk-adjusted capitalization and strategic importance to Zurich Financial Services Ltd. (Zurich). Farmers’ is the third-largest personal lines insurer in the United States, with a particularly strong market position in the western and southwestern United States.
Although Zurich has no ownership interest in the Farmers Insurance Exchange, both entities are strategically linked via a management relationship between the Exchanges and FGI, Zurich’s wholly owned subsidiary. This linkage provides Zurich with a source of consistent fee income.
Given the structural relationship between Zurich and the Exchanges, A.M. Best deviated from its “Rating Members of Insurance Groups” methodology by providing Farmers with rating enhancement from Zurich.
As prescribed by the methodology, to be eligible for rating enhancement, an individual company must operate under common ownership, with the entity providing lift or maintaining board control together with common management. In this case, while there is common management, the boards of FGI and the Exchanges are independent.
S&P revised its outlook on Fidelity & Guaranty Life Insurance Co. (FGLIC), formerly known as OM Financial Life Insurance Co., to positive from negative. At the same time, we affirmed our unsolicited 'BB-' counterparty credit, financial strength, and financial enhancement ratings on FGLIC.
S&P says the outlook revision reflects FGLIC's improved operating performance and decreased risk in the investment portfolio. In 2010, FGLIC had adjusted statutory net income of $168 million, which includes $295 million of operating earnings, $49 million of net realized capital losses, and $78 million of unrealized capital losses, says S&P.
The $78 million is largely a result of unrealized losses on derivatives backing the equity-indexed annuities. In comparison, the company reported a $146 million adjusted statutory net loss in 2009, which consisted of $59 million of operating earnings, $378 million of net realized capital losses, and $173 million of unrealized capital gains (largely because of the derivatives).
When analyzing statutory earnings, S&P adjusts income to include the unrealized gains or losses on derivatives backing the equity-indexed annuities, reported as a component of capital and surplus. This is done in order to match it against the offsetting credit to reserves, reported in income from operations.
Moody's has withdrawn its Baa3 rating on First American Financial Corp.'s recently announced $250 million senior secured notes, in light of First American's decision not to proceed with the offering.
First American Financial Corp. is one of the nation's largest providers of title insurance. For the first quarter of 2011, the company reported total revenue of $932 million, and a net loss of $15 million. Total shareholders' equity at March 31, 2011, for was $2 billion.
Please see ratings tab on the issuer/entity page on www.Moodys.com for the last rating action and the rating history.
S&P assigned its unsolicited 'BBB' senior debt rating to Markel Corp.'s $250 million, 10-year senior unsecured notes, which is a drawdown from its existing universal shelf filing, dated Dec. 18, 2008.
The rating action reflects S&P’s expectations that, based on Markel's March 31, 2011, financial results, the company's pro forma financial leverage will increase to 28% from 24%.
This is consistent with S&P’s published expectations that Markel's financial leverage will remain below 30%. The company's coverage metrics are only minimally affected by this issuance. The proceeds will be held at the holding company to support general and corporate activities, including acquisitions.
The unsolicited 'BBB' counterparty credit rating on Markel reflects its strong competitive position in the U.S. excess and surplus and specialty admitted lines of business; its strong capital that is well redundant for the rating level; and its strong liquidity. Partly offsetting these strengths are the company's deteriorating operating performance, which is attributed to soft market conditions, and its high expense ratio, relative to its peers', even when considering the affect of the One Markel initiative's costs. S&P expects that the initiative will generate expense efficiencies, once fully implemented in 2012.
The potential for adverse reserve development on legacy asbestos and environmental reserves, and the significant investment risk, due to high equity exposure and sector concentration, are additional rating weaknesses.
A.M. Best has revised the outlook to stable from negative and affirmed the financial strength rating of A- (Excellent) and issuer credit ratings of “a-” of Plymouth Rock Assurance Group (PRAG), which includes the operations of its reinsured subsidiary Mt. Washington Assurance Corp. and intercompany pool
members: Plymouth Rock Assurance Corp. (PRAC), Pilgrim Insurance Co. and Plymouth Rock Assurance Casualty Co.
The revised outlook reflects PRAG’s enhanced capital management strategies through its strengthened level of risk-adjusted capitalization, improved operating performance, positive loss reserve development and reduced dependence on reinsurance.
The company’s operating performance and capitalization recovered from the transitional effects of the change in the Massachusetts private-passenger automobile marketplace to “managed competition,” and the adverse impact of the equity market downturn of 2008.
Over the past three years, the group enhanced its pricing segmentation model to refine pricing on risks that meet its underwriting requirements, improved claims-handling processes and procedures that lowered severity and increased distribution through agency management initiatives. However, as one of the top 5 auto carriers in Massachusetts, PRAG’s operating results likely will continue to be pressured by its elevated underwriting and investment leverage, geographic concentration, increased competition and uncertainties with evolving insurance regulation.
Fitch has affirmed the ratings of Principal Financial Group Inc. (PFG) and its subsidiaries. The affirmation includes the Insurer Financial Strength (IFS) ratings of PFG's primary life insurance company subsidiaries at 'AA-' and its holding company senior debt rating at 'A-'. The rating outlook is revised to stable from negative.
The revision to a stable outlook reflects Fitch's view that potential investment losses will be manageable, given PFG's capital and earnings levels. The company's gross unrealized investment loss position has improved significantly in recent quarters, moving from $1.7 billion at Sept. 30, 2010, to $1.1 billion as of March 31, 2011. The company's net unrealized position was a gain of $1 billion at March 31, 2011. In addition, Fitch notes the improvement to the company's operating profile, particularly in PFG's important pension business, and expects the trend to continue in 2011.
Operating earnings were $845 million in 2010, a 15% improvement over 2009. Interest coverage by operating earnings before taxes and interest was 7.8 times (x).
While Fitch believes that PFG will continue to face margin pressure in the pension business, the company is placing increasing emphasis on its fee-based businesses, such as asset management and certain pension products. These growth businesses are expected to help mitigate the earnings lost from the scale-back in its institutional spread business and the divestiture of its health insurance business.
Fitch assigned QBE Insurance Group Ltd.'s (QBE) GBP325m issue of 7.5% subordinated notes a rating of 'BBB'. At the same time, Fitch has affirmed the ratings of the group. The outlook is stable.
The rating of the notes is three notches below QBE's Long-Term Issuer Default Rating (IDR), due to an interest deferral option, their structural subordination option and lower recovery assumptions.
The affirmations of the group ratings reflect Fitch's estimates that, together with the $1 billion issue of 7.25% exchangeable subordinated notes, QBE's leverage ratio will increase modestly, but remain within tolerances for an 'A' rated insurer. In addition, Fitch expects that the impact to QBE's capital ratios is likely to be positive, although the full extent of the improvement will not be known until the group reports its half-year results at June 30, 2011.
A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of Selective Insurance Group (Selective) and its seven property and casualty pooling members. Concurrently, A.M. Best has affirmed the ICR of “a-” and debt ratings of Selective’s parent holding company, Selective Insurance Group Inc. (SIGI). The outlook for all ratings is negative.
The ratings reflect Selective’s strong capitalization, solid level of operating profitability and established presence within its targeted regional markets. These positive attributes are driven by the group’s experienced management team, disciplined underwriting focus, successful field-based operating model and growing use of sophisticated predictive analytic modeling tools.
Furthermore, the group benefits from the financial flexibility provided by SIGI, which maintains financial leverage that is in line with its current ratings, as well as additional liquidity through its access to capital markets and lines of credit.
The rating outlook reflects Selective’s relatively lackluster underwriting results in recent years, relatively higher underwriting leverage measures and narrow geographic concentration of risk. In addition, Selective’s underwriting performance has been impacted by above-average catastrophe losses in recent years. Moreover, while Selective has reported favorable loss reserve development in recent calendar years, adverse development has continued in select accident years and in certain lines of business, all of which continues to influence underwriting results to some extent.
A.M. Best has downgraded the financial strength rating (FSR) to A (Excellent) from A+ (Superior) and issuer credit ratings (ICR) to “a+” from “aa-” of State Auto Insurance Co.s (State Auto) and its operating members. Concurrently, A.M. Best has downgraded the ICR to “bbb+” from “a-” and debt rating to “bbb+” from “a-” on $100 million, 6.25% senior unsecured notes, due 2013, issued by the group’s intermediate holding company, State Auto Financial Corp. (STFC). The outlook for all ratings has been revised to stable from negative.
The downgrades are based on State Auto’s deterioration in underwriting and operating earnings in recent years, driven by an increased frequency and severity of property catastrophe losses.
The ratings reflect State Auto’s strong risk-adjusted capitalization, long-standing regional market presence, well-established agency relationships, strong brand-name recognition and diversified product offerings. State Auto also benefits from its software technology, which further enhances and cultivates agency relationships, while improving overall operating efficiencies.
Solid investment income, expanded pricing models, as well as improved risk management, have contributed to moderate operating earnings during the previous five-year period. The ratings further reflect the financial flexibility and access to capital through STFC.
A.M. Best has revised the outlook to stable from negative and affirmed the financial strength rating of A (Excellent) and issuer credit ratings of “a” of Wellmark Inc., d/b/a Wellmark Blue Cross and Blue Shield of Iowa, and its insurance subsidiaries, Wellmark Health Plan of Iowa Inc. and Wellmark of South Dakota Inc., d/b/a Wellmark Blue Cross and Blue Shield of South Dakota (BCBSSD).
The revised outlook reflects the overall organization’s improvement in underwriting earnings and capitalization. Wellmark and its subsidiaries reported a substantial growth in underwriting earnings in 2010, after three years of losses, due to pricing above-cost trend in their fully insured products and lower utilization rates leading to decreased year-over-year benefit expenses. The growth in capitalization was driven by strong operational gains.
The rating affirmations are based on the above factors as well as Wellmark’s market position in Iowa and South Dakota, low operational costs and strong level of capitalization. Additionally, the company has very good cost controls in place and is among the lowest administrative cost Blue Cross and Blue Shield plans, with administrative cost ratios averaging below 10%.
Fitch affirmed the Insurer Financial Strength Ratings (IFS) of Westpac Lenders Mortgage Insurance Ltd. (WLMI) and St. George Insurance Australia Pty. Ltd. (SGIA) at 'AA'. The outlook for both is stable. At the same time, Fitch has withdrawn the rating of SGIA, due to the reorganization of the rated entity, and will no longer provide ratings or analytical coverage for SGIA.
SGIA's and WLMI's ratings reflect their robust financial profiles, characterized by strong capital ratios, historically prudent underwriting and risk acceptance, and conservative investment portfolios. While in Fitch's opinion, SGIA and WLMI would have sufficient capital to withstand a range of severe downturn scenarios, the agency notes the benefit the companies receive from being part of a larger financial services group, Westpac Banking Corp. ('AA'/Stable). With total assets of AUD622bn and shareholders equity of AUD42bn at March 31, 2011, Fitch considers WBC would be willing and capable of providing financial support for growth or recapitalization, were it needed.
Following the transfer of SGIA's risk portfolios into WLMI, SGIA no longer operates as a mortgage insurer, and Fitch has withdrawn its rating. Although there is little prospect of the remaining WLMI rating being upgraded to 'AA+', given the current high rating level, a severe housing downturn, most likely due to a sharp rise in unemployment, could have negative implications for the rating.
A key consideration in such a scenario would be the willingness and ability of the group to provide support, should it be required. In addition, should WBC suffer a downgrade to its rating, this would result in a lower rating for WLMI.
