S&P lowered its counterparty credit rating, insurer financial strength (IFS) rating and financial enhancement rating on Switzerland-based Allianz Risk Transfer AG (ART) and related subsidiaries to 'AA-' from 'AA'. At the same time, we affirmed the 'A-1+' short-term counterparty credit rating. The outlook is stable.
The one-notch downgrade follows the scheduled termination of sizable blocks of core traditional intragroup business that ART underwrites, which is due to take place by year-end 2010, and which S&P previously expected, according to S&P. As a result, S&P no longer equalizes the ratings with those on its ultimate parent, Allianz SE (AZSE; AA/Stable/A-1+).
Moody's affirmed the Baa3 senior debt rating of Americo Life Inc. (Americo) and the A3 IFS rating of its operating subsidiary, Americo Financial Life and Annuity Insurance Co. (Americo Financial). The outlook for the companies was changed to stable from negative. Americo Financial is a wholly owned subsidiary of Americo, and Americo, in turn, is a wholly owned subsidiary of privately held Financial Holding Corp. (unrated).
The affirmation of Americo's ratings and the change in outlook to stable were driven primarily by the company's improvement in regulatory capital, as well as an expectation of improved operating earnings and more modest investment losses going forward, according to Moody's.
S&P revised its outlook on Allied World Assurance Co. Holdings Ltd. and its operating subsidiaries to positive from stable. At the same time, S&P affirmed all of its ratings on AWH, including the 'BBB' counterparty credit rating, as well as the 'A-' counterparty credit and FSRs on the core operating companies.
S&P revised the outlook to positive based on the company's strong financial profile, which encompasses a track record of strong operating results since inception, with an average combined ratio of 90% and a return on revenue of 23% from 2002 to 2009, as well as strong investments and capitalization for the rating.
Moody's downgraded the IFS rating for AXA Sun Life plc and Sun Life Assurance Society plc (collectively AXA UK Life) to A1 from Aa3. These ratings remain on review for possible downgrade.
Moody's also affirmed the A3 IFS rating of Friends Provident Life & Pensions Ltd. (FPLP) and the Baa3 subordinated debt of Friends Provident Group plc (Friends Provident) and changed the outlook on these ratings to positive from developing. Moody's downgraded the IFS rating of Axa Sun Life Holding plc to A1 from Aa3; this rating will be withdrawn as the company does not write insurance business from this legal entity.
The rating actions were prompted by the announcement of the proposed acquisition by Resolution Ltd. (not rated), via Friends Provident Holdings (UK) Ltd., of AXA UK life's operations in the risk areas of protection, annuities and group pension.
Moody's said the downgrade of AXA UK Life's ratings reflects the removal of the rating support from the parent company AXA SA (A2 senior debt rating/stable outlook) previously included in the ratings, as a result of the disposal of these operations to Resolution.
A.M. Best revised the outlook to stable from negative and affirmed the FSR of A- (excellent) and ICR of “a-” of Blue Cross Blue Shield of Michigan (BCBSM) and Blue Care Network of Michigan.
BCBSM has the highest market share and the broadest geographies of service coverage in Michigan, according to A.M. Best. The stable outlook reflects the stabilization of BCBSM’s risk-based capital in 2009 after a continuous decline from 2005 through 2008. While capital and surplus grew by 15% year over year, the level of risk-based capital was impacted by increased underwriting risk; as a result the level of risk-based capital was relatively flat year over year.
A.M. Best affirmed the FSR of A (excellent) and issuer credit rating (ICR) of “a” of Brit Insurance Ltd. (BIL). At the same time, A.M. Best affirmed the ICR of “bbb” of Brit Insurance Holdings N.V. (BIHNV), the ultimate parent of the Brit Insurance group of companies, and the debt rating of “bbb-” on the GBP 135 million fixed rate subordinated notes, issued and guaranteed by the intermediate holding company of BIL, Brit Insurance Holdings Ltd., and now an obligation of BIHNV. The outlook on all ratings remains stable.
BIL’s ratings continue to reflect strong risk-adjusted capitalization, on a stand-alone basis, and on a consolidated basis at BIHNV. Earnings at BIL are expected to remain positive in the near term, although largely supported by investment income from its conservative portfolio, comprising predominantly cash and highly rated fixed income securities.
Fitch Ratings upgraded the IFS rating of EQ Insurance Co Ltd (EQI) to 'BBB' from 'BBB-'. The outlook is stable.
The upgrade reflects EQI's significant improvement in operating performance in 2009 despite challenging operating conditions as a result of the recent financial crisis, the rating agency says. This was largely driven by the prudent underwriting approach taken by the seasoned management team, which places heavy emphasis on bottom line profitability as opposed to mere top-line growth.
A.M. Best downgraded the FSR to B (fair) from B+ (good) and ICR to “bb+” from “bbb-” of Financial Casualty & Surety Inc. (Financial Casualty). The outlook for both ratings has been revised to stable from negative. Concurrently, A.M. Best withdrew the ratings due to the company management’s request and assigned a category NR-4 to the FSR and an “nr” to the ICR.
The rating downgrades are based on Financial Casualty’s continued exposure to weather-related losses in its Texas homeowners’ business, while its catastrophe reinsurance program remains under renewal negotiation, A.M. Best says. The reinsurance program, which is over 90% placed as of June 21, 2010, and replaces the May 31, 2010, expiring catastrophe program, was delayed pending the June 3, 2010 approval by the Texas Department of Insurance, allowing the company to withdraw from the homeowners’ line of business, according to the rating agency.
A.M. Best assigned a debt rating of “bbb” to the $400 million 7.70% senior unsecured notes due June 2020 recently issued by Genworth Financial Inc. (Genworth). The assigned outlook is negative. The notes are a drawdown from Genworth’s universal shelf registration, which was filed in August 2009. The ratings on Genworth’s domestic life/health insurance companies and existing debt securities are unchanged.
Roughly one-half of the proceeds from this debt issuance is expected to be used to repay a portion of outstanding borrowings under the company’s two, five-year revolving credit agreements, and the remainder for general corporate purposes. The issuance of these notes is expected to have a modest impact on Genworth’s financial leverage, which remains within A.M. Best’s guidelines for its current ratings. A.M. Best notes that in the past few years, Genworth’s fixed charge coverage has declined due in part to sub par operating performance, most notably within its U.S. mortgage and international segments.
A.M. Best removed from under review with negative implications and affirmed the FSR of A+ (superior) and ICR of “aa-” of Jackson National Life Insurance Co., its wholly owned subsidiary, Jackson National Life Insurance Company of New York, and their direct parent, Brooke Life Insurance Co. (collectively referred to as JNL).
Concurrently, A.M. Best removed from under review with negative implications and affirmed the debt ratings of “a” on the existing $250 million 8.15% surplus notes due 2027 and “aa-” on notes issued under funding agreement-backed securities programs of JNL. The outlook assigned to all ratings is stable.
JNL represents the U.S. life insurance and annuity operations of its ultimate parent, Prudential plc (Prudential), an international financial services company based in the United Kingdom. JNL’s ratings had been placed under review with negative implications on March 4, 2010 in response to Prudential’s announcement that it reached an agreement with American International Group Inc. (AIG) regarding terms for the combination of Prudential and AIA Group Limited, a wholly owned subsidiary of AIG. Given its size and complexity, A.M. Best believed the transaction to be subject to substantial execution and financing risks. The ratings have been removed from under review in recognition of the recent announcement that Prudential and AIG have agreed to terminate the proposed acquisition.
S&P revised its outlook on National Western Life Insurance Co. (NWLIC) to stable from negative. S&P affirmed its 'A' counterparty credit and FSRs on the company. NWLIC's operating performance improved in 2009 compared with 2008. Supporting this improvement were improved investment income and a lower level of deferred acquisition cost amortization. Its adjusted GAAP pretax income (excluding realized gains and losses and other-than-temporary impairments on investments, and one-time charges) increased to $97.7 million in 2009 compared with $75.8 million in 2008.
Further, the company's return on assets (ROA) improved to 137 basis points (bps) in 2009 compared with 111 bps in 2008. Earnings also remained strong through the first three months of 2010, with pretax income of $27.6 million, which translates to an ROA of 144 bps.
Moody’s and S&P have assigned ratings to Penn Mutual's $200 million surplus notes that have a scheduled maturity of 2040. S&P assigned its 'A' rating to the notes and affirmed its 'AA-' counterparty credit and FSRs on Penn Mutual Life Insurance Co. and Penn Insurance & Annuity Co. (collectively referred to as Penn Mutual). The outlook on both of these companies remains stable.
Moody's Investors Service assigned an A2 debt rating to Penn Mutual Life Insurance Company's (Penn Mutual, Aa3 insurance financial strength (IFS) rating) up to $200 million of fixed rate surplus notes due 2040. The proceeds of the surplus notes will be used for general corporate purposes. The outlook on Penn Mutual is stable.
S&P views Penn Mutual's surplus note issuance favorably, and expects that Penn Mutual will use the proceeds from the sale for general corporate purposes, including funding new business growth. Moody’s says the surplus notes will increase Penn Mutual's already strong statutory surplus (year-end 2009 NAIC RBC ratio at 636%), help to fund organic business growth, and act as a buffer to absorb any potential investment losses. Following the surplus notes issuance, Moody's expects Penn Mutual to have moderate financial leverage at a level consistent with Penn Mutual's current ratings.
S&P is keeping its 'BB+' counterparty credit and FSRs on Security Benefit Life Insurance Co. (SBLIC) and its affiliate, First Security Benefit Life Insurance and Annuity Co. of New York (FSBLIC-NY), on CreditWatch with positive implications. We initially placed the ratings on CreditWatch positive on Feb. 16, 2010.
The rating agency is keeping its ratings on SBLIC and FSBLIC-NY on CreditWatch positive following the announcement that more than 90% of Security Benefit Mutual Holding Co.'s members approved the demutualization and dissolution plan, which paves the way for GP to purchase SBC.
S&P raised its ratings on SBLIC and its affiliate by one notch on February 26 to reflect SBLIC's announcement that a group of investors, led by Guggenheim Partners (GP), indirectly contributed $175 million of capital to SBLIC.
A.M. Best removed from under review with developing implications and affirmed the FSR of B++ (good) and ICR of “bbb” of Security Life Insurance Company of America (Security Life) following the announcement that Eastern Insurance Holdings Inc. (EIHI) completed the sale of its wholly owned subsidiary, Eastern Life and Health Insurance Co. (ELH), to Security Life. The purchase price was $34.1 million, which included a three-year, 4%, $1.75 million promissory note payable to EIHI from Security Life’s parent, Security American Financial Enterprises Inc., with the remainder paid in cash. The outlook assigned to the FSR is stable, and the outlook assigned to the ICR is positive.
A.M. Best believes the merger of the ELH business into Security Life will provide enhanced efficiencies and product diversity while creating additional cross-selling opportunities and promoting geographic expansion of the company’s core dental and vision offerings.
A.M. Best affirmed the FSR of B++ (good) and ICR of “bbb+” of Western Life Assurance Co. (Western Life). The outlook for both ratings is stable.
The ratings reflect Western Life’s trend of stable capitalization, low levels of credit risk on its balance sheet, increasing premium production and positive operating earnings, according to A.M. Best. Risk-adjusted capitalization remains adequate and is enhanced by the high credit quality of the investment portfolio, which has no exposure to below investment grade bonds, mortgages or real estate. Over the last few years, the company’s absolute capital levels have improved due to the continued profitability of its operations, although these levels still remain somewhat modest. Western Life has demonstrated continued growth in its target markets, with the core group accident and sickness the largest contributing segment by premium income and earnings.
