AIG and its insurance subsidiaries
S&P affirmed its 'A-/A-1' counterparty credit ratings on American International Group Inc. (AIG). The rating agency also affirmed its 'A+' counterparty credit and financial strength ratings (FSR) on its insurance subsidiaries, Chartis and SunAmerica Financial Group. The outlook remains negative.
The counterparty credit rating on AIG reflects S&P’s opinion of the extraordinary support from the U.S. government in light of AIG's perceived status as a highly systemically important U.S. financial institution, as well as the rating agency’s view of the company's 'A+' rated multi-line insurance subsidiaries. S&P expects the government support to continue during AIG's period of stress.
The long-term counterparty credit rating on AIG includes a five-notch uplift from S&P’s assessment of the company's stand-alone 'BB' credit profile, and takes into consideration the level of extraordinary government support currently provided to the company.
The 'A+' financial strength ratings on Chartis and related P&C insurance companies reflect the rating agency’s view of a strong global P&C franchise that is well diversified by geographic location and product line.
CampMed Casualty & Indemnity Company Inc. of Maryland
A.M. Best Co. upgraded the FSR to A (excellent) from B (fair) and issuer credit rating (ICR) to “a” from “bb” of CampMed Casualty & Indemnity Company Inc. of Maryland. These ratings have been removed from under review with positive implications and assigned a stable outlook.
In addition, A.M. Best has withdrawn the FSR of C (weak) and ICR of “ccc” of Health Facilities Insurance Corporation Ltd. (HFIC), assigning an NR-5 (not formally followed) to the FSR and “nr” to the ICR.
The upgrading of CampMed’s ratings reflects that it is now a member of The Hanover Insurance Group Property and Casualty Cos. (The Hanover). CampMed and HFIC were acquired by The Hanover Insurance Group Inc. in March, 2010. The ratings for CampMed recognize The Hanover’s strong risk-adjusted capitalization, through a 100% quota share reinsurance agreement.
CIGNA Corp. and operating company
S&P affirmed its 'BBB' counterparty credit and 'A-2' commercial paper ratings on CIGNA Corp. At the same time, the rating agency affirmed its 'A' counterparty credit and FSRs on CIGNA's main operating company, Connecticut General Life Insurance Co. The outlook remains negative.
The ratings on CG Life and CIGNA are based on their strong consolidated competitive position and operating performance, good financial flexibility and limited exposure to provisions of the recently enacted health care reform legislation, S&P says.
ECM Insurance Group and 1st Choice Auto Insurance Company Inc.
A.M. Best Co. upgraded the FSR to A- (excellent) from B++ (good) and ICR to “a-” from “bbb+” of ECM Insurance Group (Group), its member, Everett Cash Mutual Insurance Co. (Everett Cash Mutual) and 1st Choice Auto Insurance Company Inc. (1st Choice Auto), the direct subsidiary of Everett Cash Mutual. The outlook for these ratings is being revised to stable from positive.
In addition, A.M. Best affirmed the FSR of B++ (good) and ICR of “bbb” of Ever-Greene Mutual Insurance Co. (Ever-Greene), an affiliate of Everett Cash Mutual. The outlook for these two ratings is stable.
The rating actions on the Group reflect its excellent risk-adjusted capitalization, solid underwriting and operating performance in its niche market of farm owners/small commercial coverages and its conservative investment portfolio. The rating upgrades also reflect A.M. Best’s expectation that underwriting performance and risk-adjusted capitalization will continue to trend favorably. These positive rating factors are somewhat offset by the Group’s current tight geographic concentration of risk.
The ratings of 1st Choice Auto recognize its continued underwriting profitability and solid risk-adjusted capitalization as a strategic subsidiary of Everett Cash Mutual, the rating agency says. The ratings of Ever-Greene are indicative of its modest underwriting leverage, profitable operating performance, favorable risk-adjusted capitalization and affiliation with the Group, and are somewhat offset by Ever-Greene’s limited business profile, A.M. Best says.
Everest Re Group Ltd., Everest Reinsurance Holdings and operating companies
S&P raised its counterparty credit ratings on Bermuda-based Everest Re Group Ltd. and its U.S.-based intermediary holding company, Everest Reinsurance Holdings Inc. (Everest Holdings), to 'A-' from 'BBB+'. At the same time, S&P affirmed its 'A+' counterparty credit and FSRs on the operating subsidiaries—Everest Reinsurance (Bermuda) Ltd. (Bermuda Re), Everest Reinsurance Co. (Everest Re), Everest National Insurance Co. and Everest Reinsurance Co. (Ireland) Ltd. (collectively referred to as Everest). The outlook on all of these entities is stable.
The upgrade, or the narrowing of the notching between the ratings on the holding companies and the ratings on the operating companies to two rather than three notches, stems from Everest's modest financial leverage, strong interest coverage, and substantial liquidity and marketable assets held at the holding companies, the rating agency says.
First Beacon Insurance Co.
A.M. Best Co. downgraded the FSR to B+ (good) from B++ (good) and the ICR to “bbb-” from “bbb” for First Beacon Insurance Co., a captive insurer of Alcatel-Lucent. The outlook for both ratings remains negative.
The rating actions reflect concerns over the financial position of First Beacon’s ultimate parent, Alcatel-Lucent. Supporting the rating is a robust level of risk-adjusted capitalization and a stable operating performance, according to the rating agency.
A.M. Best has concerns at Alcatel-Lucent’s long-term business profile and financial strength. The 2009 financial year witnessed a 10.8% fall in revenue and a third successive year of overall losses for the company. Although Alcatel-Lucent maintains a good range of products, demand remains weak and competition is strong. First Beacon’s business profile is largely dependant on the economic success of Alcatel-Lucent and any additional deterioration in the financial position of the parent is likely to add further pressures to the captive’s rating level.
Fitch Ratings affirmed the 'BBB' issuer default rating (IDR) on Harleysville Group Inc. (HGIC) and the 'BBB-' rating on HGIC's $100 million senior unsecured notes due July 15, 2013. Fitch also affirmed the 'A-' insurer financial strength (IFS) rating on the Harleysville inter-company pool (Harleysville). HGIC's rating outlook is stable.
Harleysville's underwriting performance has stabilized at levels that have averaged near breakeven levels over the past five years, Fitch says. While this represents significant improvement over Harleysville's performance during the preceding years, these underwriting results continue to lag much of Fitch's rated universe over the same time period. Harleysville's 2009 statutory combined ratio improved to 99.8% in 2009 from 100.3% in the prior year. Given the company's status as a midsized regional company and cyclical pressures in its core commercial lines, the company's ability to improve upon recent results remains in question.
Mercury Casualty Co. and Mercury Insurance Co.
Moody's Investors Service affirmed the Aa3 IFS ratings of Mercury Casualty Co. and Mercury Insurance Co. and the A3 senior debt rating of Mercury General Corp. In the same rating action, Moody's changed the rating outlook to stable from negative reflecting meaningfully improved financial results in 2009 in line with historical performance.
The change to a stable outlook reflects Moody’s view that the company will maintain its consistent underwriting profitability given its strong position in the California personal auto market and its conservative financial leverage profile (13% adjusted debt to capital at 12/31/2009).
In response to recent profitability issues outside of California, Mercury General has instituted a number of internal controls designed to centralize oversight of underwriting and claims operations for business outside of the state. The rating agency expects these enhancements will mitigate exposure to operational risks associated with the company's geographic expansion efforts.
A.M. Best Co. revised the outlook to positive from stable and affirmed the FSR of B++ (Good) and ICR of “bbb+” of Mississippi Farm Bureau Casualty Insurance Co.
The positive outlook reflects Mississippi FB Casualty’s continued strong operating earnings and improved risk-adjusted capitalization through organic surplus growth, the rating agency says. The ratings also recognize Mississippi FB Casualty’s favorable risk-adjusted capitalization, prudent risk-management strategies and the historical support the company receives from its parent, Southern Farm Bureau Casualty Insurance Co. These positive rating factors are reflective of management’s underwriting and catastrophe management initiatives, according to A.M. Best.
Moody's upgraded the surplus note rating of Pennsylvania National Mutual Casualty Insurance Co. (Penn National Mutual) to Baa3 from Ba1. In the same action, Moody's upgraded the IFS ratings of the group's primary insurance companies to A3 from Baa1 (collectively Penn National Insurance). The outlook for the ratings is stable.
The ratings' upgrades on Penn National Insurance reflect what Moody’s believes to be the group's progress in building a more diversified portfolio of businesses, steady profitability and strong capitalization despite the turmoil in the broader financial markets as well as its relatively low financial leverage profile.
Penn National Insurance's ratings also reflect the group's established position in smaller independent agency markets, consistent operating results, conservative balance sheet and moderate exposure to natural and man-made catastrophes, according to the rating agency.
S&P lowered its counterparty credit and FSRs on Primerica Life Insurance Co. (PLIC) to 'AA-' from 'AA' and removed them from CreditWatch, where they were placed on Nov. 9, 2009, with negative implications. The outlook on PLIC is stable.
The downgrade reflects S&P’s assessment of PLIC's structural changes and their impact on the company's financial profile, namely its operating performance and capitalization. As part of its restructuring, PLIC has reinsured about 90% of its stable in-force life insurance business to Citigroup Inc. As a result, the rating agency believes that PLIC's future earnings will be moderately more susceptible to volatility risk.
Securian Financial Group Inc. life companies
A.M. Best Co. revised the outlook to stable from negative and affirmed the FSR of A+ (superior) and ICR of “aa-” of Minnesota Life Insurance Co. and its subsidiary, Securian Life Insurance Co. In addition, A.M. Best revised the outlook to stable from negative, and affirmed the debt rating of “a” on $125 million 8.25% existing surplus notes due September 2025 of Minnesota Life. All the above companies are subsidiaries of Securian Financial Group Inc.
The ratings reflect A.M. Best’s belief that Securian’s life companies remain well capitalized following the events of the financial crisis. In 2009, Minnesota Life recorded improvement in its reported and risk-adjusted capitalization, a lower level of impairments and improved overall earnings levels as compared to 2008. In addition, the company’s financial leverage remains well within the range for its ratings, and there are no debt maturities in the near term.
Moody's Investors Service has withdrawn the Prime-1 commercial paper rating for Teachers Insurance and Annuity Association of America (TIAA). The TIAA commercial paper program had no outstanding obligations since November 2008 and has been terminated by the company. The long-term debt and IFS ratings of TIAA are unaffected by the withdrawal.
Wilton Reinsurance Bermuda Ltd. and its affiliates
A.M. Best Co. revised the outlook to positive from stable, and affirmed the FSR of A- (excellent) and ICRs of a-” of Wilton Reinsurance Bermuda Ltc. and its affiliates, Wilton Reassurance Co., Wilton Reassurance Life Company of New York and Texas Life Insurance Co. (together known as Wilton Re).
The revised outlook for Wilton Re reflects the continued successful execution of its business plan with continued acquisition activity such as the purchase of Texas Life in 2009, the rating agency says. In addition, Wilton Re has weathered the economic crisis well, generating favorable GAAP earnings and raising new equity capital in a very difficult market. Moreover, Wilton Re has no financial leverage.
The affirmation of Wilton Re’s ratings are based upon its consistent history of profitable growth, A.M. Best’s belief that the company will adhere to its business plan of growing largely through reinsuring life books of business and A.M. Best’s expectation that Wilton Re will maintain strong risk-adjusted capitalization levels. In addition, the recent acquisition of Texas Life allows Wilton Re to enter into an established and developed direct market with ongoing new premium generation through a writer that has solid capitalization and a history of profitable operations. In A.M. Best’s view, Wilton Re’s current risk-adjusted capital position is more than adequate to support its existing business.
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