Moody's downgraded Aetna Inc.'s senior debt rating to Baa1 from A3, reflecting the company's lower earnings outlook for 2010, as well as the continued sluggish economic environment and unfavorable political climate for the healthcare insurance sector, the rating agency says. In the same rating action, the insurance financial strength (IFS) rating of Aetna Life Insurance Co. was downgraded to A1 from Aa3. The outlook on Aetna and its operating subsidiaries is stable.
Commenting on the downgrade, the rating agency noted that although Aetna's expected earnings margins (projected to be in the 3% to 4% range) remain solid, the impact of lower earnings on the company's overall financial profile, combined with the expectation of lower than historical growth rates for the next couple of years, is consistent with an A1 IFS credit profile.
A.M. Best Co. upgraded the issuer credit ratings (ICR) to “bbb+” from “bbb” and senior debt ratings of American Financial Group Inc. (AFG) and AAG Holding Company Inc.
Concurrently, A.M. Best upgraded the ICRs to “a+” from “a” and affirmed the financial strength ratings (FSR) of A (excellent) of Great American Insurance Cos. (Great American) and Mid-Continent Group (Mid-Continent) and their property/casualty members.
Additionally, A.M. Best affirmed the FSR of A+ (superior) and ICRs of “aa-” of American Empire Surplus Lines Pool (American Empire) and its property/casualty members.
A.M. Best also has affirmed the FSR of A (excellent) and ICRs of “a” of Republic Indemnity Insurance Pool (Republic Indemnity) and its property/casualty members. The outlook for all ratings is stable.
The upgrading of the ratings for Great American reflects its improved risk-adjusted capitalization, positive operating trends in core business lines and favorable reserve development in recent years, the rating agency says. These positive factors are driven by Great American’s strong business position, experienced management team and balanced portfolio of specialty risks that is enhanced by geographic diversification.
Moody's withdrew the A3 senior debt rating for Ameriprise Financial Services Inc. (AFS). AFS, an indirect subsidiary of Ameriprise Financial Inc., had no debt outstanding as of Dec. 31, 2009. The long-term debt ratings of Ameriprise Financial Inc. and its subsidiaries (including RiverSource Life Insurance Co., insurance financial strength rating at Aa3, stable outlook) are unaffected by this rating withdrawal.
As of March 31, 2010, Ameriprise Financial Inc. had assets of approximately $122 billion and shareholders' equity of $9.6 billion, the rating agency says. The last rating action on Ameriprise Financial Inc. occurred on March 8, 2010, when Moody's assigned an A3 senior debt rating to a $750 million senior debt issue and changed the Ameriprise rating outlook to stable from negative.
A.M. Best Co. removed from under review with negative implications and affirmed the FSR of A++ (superior) and ICR of “aa+” of the Berkshire Hathaway Homestate Cos. (BHHC) and its six property/casualty group members: Brookwood Insurance Co., Cornhusker Casualty Co., Continental Divide Insurance Co., Cypress Insurance Co., Oak River Insurance Co. and Redwood Fire and Casualty Insurance Co.. The outlook assigned to all ratings is stable.
On Nov. 6, 2009, A.M. Best placed the ratings on all rated members of Berkshire Hathaway Inc. (Berkshire) under review with negative implications as a result of the Berkshire acquisition of the remaining 77% of Burlington Northern Santa Fe (BNSF) railroad, which was not already owned. The under review status reflected A.M. Best’s concerns regarding the potential utilization of Berkshire’s insurance and reinsurance operations as a funding source for the transaction given the size of the acquisition.
The ratings reflect the group's strong capitalization, historical track record of operating profitability, conservative underwriting leverage measures and favorable balance sheet liquidity, the rating agency says. The ratings also acknowledge the group's aggressive claims management, effective loss control services and the successful track record of the executive team in managing operations. The rating further recognizes the additional financial flexibility and support provided by its publicly traded parent and ultimate shareholder, Berkshire Hathaway Inc.
S&P revised its outlook on Fidelity Investments Life Insurance Co. and its wholly owned subsidiary, Empire Fidelity Investments Life Insurance Co., to stable from negative. At the same time, it affirmed the 'A+' counterparty credit and financial strength ratings on the companies. Fidelity Investments Life and Empire Fidelity Investments Life are core to their parent, FMR LLC, the rating agency says. Therefore it revised the outlook on the two companies to reflect the outlook revision on FMR to stable on April 30, 2010.
S&P revised its outlook on Genworth Financial Inc. (GNW) to stable from negative. It also affirmed a 'BBB' counterparty credit rating on GNW and 'A' counterparty credit and FSRs on GNW's life insurance operations (collectively referred to as Genworth). The ratings on the U.S. mortgage operations are unaffected, and the outlook remains negative.
The rating agency revised the outlook on GNW to stable because of its improved operating performance at the retirement and protection segment and significant improvement at the U.S. mortgage insurance segment. As a result of the strong performance, S&P does not believe that GNW will need to support its subsidiaries through capital infusions and will instead receive dividends from its operating subsidiaries over the next three years, the rating agency says.
Kansas Bankers Surety Co.
A.M. Best removed from under review with negative implications and affirmed the FSR of A++ (superior) and issuer credit rating of “aa+” of Kansas Bankers Surety Co. The outlook assigned to both ratings is stable.
The ratings reflect Kansas Bankers’ superior capitalization, historical track record of operating profitability, solid balance sheet liquidity measures and its strong niche market presence of serving the small to medium-sized commercial bank market, A.M. Best says. The positive rating attributes are supported by Kansas Bankers’ conservative underwriting leverage measures, high quality balance sheet and its recognition among Midwest regional commercial banks, a market the company has served for decades. Management continues to emphasize profitability over top-line growth, as demonstrated by the company’s announcement in September 2008 to discontinue its Bank Deposit Guaranty Bond product, which made up approximately 50% of its premium writings in recent years.
North American Casualty Group and its members
A.M. Best Co. removed from under review with negative implications and affirmed the FSR of A (excellent) and ICR of “a” of North American Casualty Group (NAC) and its members, California Insurance Co. and Continental Indemnity Co., which operate under a pooling arrangement. The outlook assigned to all ratings is stable.
The ratings reflect the group’s strong capitalization and the favorable historical underwriting performance of business produced by its parent, Applied Underwriters Inc. (Applied), a leading provider of bundled workers’ compensation insurance and payroll processing services to small and medium-sized businesses
Fitch Ratings affirmed the 'AAA' IFS rating of The Northwestern Mutual Life Insurance Co. (NM) and Northwestern Long Term Care Insurance Co. (NLTC). At the same time Fitch affirmed the 'AA' debt rating assigned to NM's surplus notes. The rating outlook is stable.
Fitch's ratings reflect NM's very strong competitive position in the U.S. life insurance market and exceptionally strong balance sheet fundamentals. NM's key competitive advantages include its successful distribution system, large and stable block of traditional life insurance, and focus on expense control, the rating agency says. NM's exposure to variable annuity risk is minimal due to the relatively small size of its variable annuity business and the lack of living benefit guarantees.
Prudential Gibraltar Financial Life Insurance Co. Ltd.
S&P assigned its 'A+' long-term counterparty credit and insurer FSRs to Japan-based Prudential Gibraltar Financial Life Insurance Co. Ltd. (PGF). PGF restarted operations in June 2009 after the failed life insurance company, Yamato Life, completed its rehabilitation process and resumed business operations as PGF and a wholly owned unit of Gibraltar Life Insurance Co. Ltd., S&P says.
The ratings on PGF reflect its strategic importance to the wider, U.S.-based Prudential Financial group, which fully owns Gibraltar, as a third-party life insurance distribution vehicle for the Prudential Financial group in Japan; as well as its good business position due to support from Gibraltar, which has been transferring its bancassurance sales divisions to PGF and providing reinsurance support.
The outlook on the ratings is stable. The rating agency considers PGF as a strategically important entity within the Prudential Financial group because of the strong reinsurance support for PGF's new business provided by Gibraltar and the group, as well as because of the group's demonstration of strong commitment to the Japanese insurance market.
Moody's affirmed the Ba3 IFS rating of Radian Guaranty Inc. and Amerin Guaranty Corporation (collectively "Radian Guaranty"), the B1 IFS rating of Radian Insurance Inc., and the Caa1 senior debt rating of the holding company, Radian Group and changed the rating outlook to positive from negative. Moody's has also affirmed the Ba1 IFS rating, stable outlook, of Radian Asset Assurance Inc. and its wholly owned subsidiary, Radian Asset Assurance Limited (collectively "Radian Asset").
The action was prompted by Radian Group's announced public offering and pricing of approximately $550 million of common stock. Radian intends to use the net proceeds from this offering to fund working capital requirements and for general corporate purposes, which may include additional capital support for the mortgage insurance business and repurchases of, or payments on, outstanding debt securities. Moody’s contends the offering proceeds will improve the holding company's liquidity and enhance Radian's capital and business prospects, said Moody's.
A.M. Best removed from under review with negative implications and affirmed the FSR of A+ (superior) and ICR of “aa” of Seaworthy Insurance Co. The ratings have been assigned a stable outlook.
The ratings reflect Seaworthy’s strong capitalization, historic underwriting profitability indicative of management’s niche ocean marine expertise and the implicit and explicit financial support provided by the ultimate parent, Berkshire, and a Berkshire subsidiary in the form of two significant reinsurance transactions.
A.M. Best Co. downgraded the FSR to D (poor) from C+ (marginal) and ICR to “c” from “b-” of United Security Life and Health Insurance Co. (USL&H). The outlook for both ratings is negative.
The rating downgrades reflect USL&H’s continued very weak risk-adjusted capital position and high exposure to common and preferred equities, A.M. Best says. The divestiture of its equity portfolio and the receipt of a capital infusion from its parent organization have not taken place as anticipated by A.M. Best since its last rating review.
A.M. Best removed from under review with negative implications and affirmed the FSR of A++ (superior) and ICR of “aa+” of United States Liability Insurance Group (US Liability) and its members. The ratings have been assigned a stable outlook.
The ratings reflect US Liability’s strong capitalization, outstanding long-term operating profitability and the advantages derived from management’s proven underwriting discipline, the rating agency says. A.M. Best also recognizes the implicit and explicit financial support provided by its ultimate parent, Berkshire, and the added financial flexibility afforded by a Berkshire subsidiary as demonstrated in 2007.
Fitch Ratings affirmed the long-term issuer default rating (IDR) of WellPoint Inc. at 'A', and the IFS ratings of WellPoint's operating subsidiaries at 'AA-'. The rating outlook remains negative.
The action follows a review of WellPoint's operating performance in 2009 and the first quarter of 2010, and reflects Fitch's expectations for the company's performance for the remainder of 2010.
Despite an unfavorable enrollment environment driven by ongoing difficult global economic conditions, WellPoint has continued to produce respectable operating margins and cash flow, albeit at levels somewhat below those achieved in previous years, the rating agency says. In 2009, the company generated an EBIT margin of 6.6%, adjusted for the sale of its pharmacy benefits manager. This is up from 5.9% in 2008.
Fitch's ratings on WellPoint and its subsidiaries are supported by the company's fairly stable operating performance, strong cash flow, good combined capitalization of its operating subsidiaries, and very strong competitive position, which is bolstered by the company's right to use the Blue Cross and Blue Shield brands.
