American Equity Investment Life Holding Co.
S&P revised its outlook on American Equity Investment Life Holding Co. (AEIL) and its operating company, American Equity Investment Life Insurance Co. (AEL), to stable from negative. At the same time, the agency affirmed its 'BB+' counterparty credit rating on AEIL and its 'BBB+' counterparty credit and financial strength ratings on AEL.
The ratings reflect AEL's strong growth and good operating performance supported by AEIL's access to the capital markets. S&P also believes that, relative to AEL's indexed annuity peers, the company has heightened event risk arising from the combination of AEL's almost-exclusive focus on fixed indexed annuities coupled with what it believes is its aggressive asset/liability management profile.
S&P revised its outlook on Ameriprise Financial Inc. and its insurance subsidiaries—RiverSource Life Insurance Co. and RiverSource Life Insurance Co. of New York—to stable from negative. Concurrently, the agency affirmed its 'A' counterparty credit rating on Ameriprise Financial and its 'AA-' counterparty credit and financial strength ratings on the operating companies (collectively referred to as RiverSource Life).
Overall, S&P says the ratings reflect Ameriprise Financial's very strong controlled distribution network led by about 11,500 financial advisers, and a marketing approach that provides excellent customer relationships. Other rating strengths include top-10 market positions in retail variable annuities and variable universal life insurance, a global asset management platform with a focus in the United States and the U.K., and very strong capitalization and investments. Enterprise earnings continue to be sensitive to equity market volatility and investor activity.
Arch Capital Group Ltd. and operating companies
S&P raised its counterparty credit rating on Arch Capital Group Ltd. to 'A-' from 'BBB+'.
The ratings agency raised its counterparty credit and financial strength ratings on Arch Capital's operating insurance and reinsurance companies to 'A+' from 'A'. The outlook on all of these companies is stable.
Partially offsetting these positive factors are potential pricing and reserving risks related to the group's significant proportion of long-tail casualty writings, given the continued competitive pricing in this segment and the potential negative inflation effects on long-tail lines of businesses, S&P says. Additionally, Arch's moderately changing business mix could carry additional pricing and reserving risk.
C.G. JCF Corp.
S&P affirmed its counterparty credit rating on C.G. JCF Corp., an intermediate holding company of Crump Group Inc., at 'B', and revised the rating outlook to stable from negative. S&P also affirmed its 'B' rating on the company's senior secured debt. The senior secured recovery rating remains unchanged at '4'.
The ratings reflect the company's highly leveraged capital structure, limited financial flexibility and weak coverage metrics.
Partially offsetting these weaknesses are its market position as the largest domestic wholesale broker based on commercial P&C and life premiums written, diversified revenue stream, improved expense structure and developing enterprise risk management framework, S&P says. In particular, Crump has a strong position in the life brokerage market. Also, though Crump's balance sheet remains highly leveraged, the company has reduced its debt significantly through voluntary principal payments, and Crump is less leveraged than many of its interactively rated peers.
Everest Re Group Ltd., its subsidiaries and Everest Reinsurance Holdings Inc.
A.M. Best affirmed the financial strength rating (FSR) of A+ (superior) and issuer credit ratings (ICR) of “aa-” of Everest Re Group Ltd.’s reinsurance and insurance subsidiaries. Concurrently, A.M. Best has affirmed the ICRs of “a-” of Everest Re and Everest Reinsurance Holdings Inc. A.M. Best also has affirmed the debt ratings of Everest Re, Everest Reinsurance Holdings Inc., Everest Re Capital Trust II and III. The outlook for all ratings is stable.
Everest Re’s ratings reflect its consistently superior risk-adjusted capitalization and excellent market profile as a leading global reinsurance company, A.M. Best says. Additionally, Everest Re maintains solid diversification by product line through its complementary primary insurance operation. A worldwide distribution system and strong broker relations further enhance the company’s leading industry position, the firm says.
Fitch Ratings also affirmed the ratings of Everest Re Group Ltd.'s debt-issuing holding company, Everest Reinsurance Holdings Inc. and its subsidiaries. Additionally, Fitch assigned an 'AA-' insurer financial strength (IFS) rating to Everest Reinsurance Co. Ltd., Everest Group's new European operating entity. The rating outlook is stable.
The affirmation of Everest Group's ratings, Fitch says, reflects the company's track record of favorable operating performance, solid balance sheet, strong franchise and competitive position in chosen markets, and diversified underwriting portfolio in primary insurance and reinsurance markets. The ratings also reflect the company's recent reductions in underwriting profitability reflecting in part the effect of significant competition in the company's chosen markets, earnings volatility from catastrophe losses and lingering exposure to asbestos-related claims. A continuing trend of unfavorable underwriting performance and returns on capital would add significant downward pressure on Everest's ratings.
S&P also commented on its ratings of Bermuda-based Everest Re Group Ltd.; its U.S.-based intermediary holding company, Everest Reinsurance Holdings Inc.; and the company's core operating subsidiaries. These ratings are not affected by the announcement of the retirement of Joseph Taranto, CEO, effective Dec. 31, 2010.
Florida Family Insurance Co. and Lakeview Insurance Co.
A.M. Best upgraded the ICR to “bbb+” from “bbb” and affirmed the FSR of B++ (good) of Florida Family Insurance Co. and Lakeview Insurance Co. (collectively known as the companies). The outlook for all ratings is stable.
The upgrading of the ICRs reflect the companies’ continued solid risk-adjusted capitalization, as well as their profitable operating performances in recent years due to their prudent underwriting criteria and sound overall risk management focus. As a result, A.M. Best says the companies have experienced significant surplus growth in recent years. In addition, conservative reinsurance programs are maintained, protecting the companies from both potential frequent and severe catastrophe events.
MetLife Inc. and subsidiaries
S&P kept its ratings on MetLife Inc., including the 'A-' long-term counterparty credit rating, and most subsidiaries on CreditWatch, where they were placed with negative implications on Feb. 3, 2010.
S&P believes access to dividends from Alico will be limited for the first one to two years following the acquisition. MetLife's unrestricted cash fixed-charge coverage ratio (which it projects at 2.3x in 2010) could decline to less than 2x if MetLife is unable to access earnings and excess capital in Alico and its subsidiaries through the early stages of integration.
MetLife's adjusted EBITDA for the six months ended June 30, 2010, was strong at $2.9 billion, which is within S&P’s expectations. As of June 30, 2010, MetLife's debt leverage was 26.4%, while financial leverage was 36.5% of total capital. S&P projects GAAP EBITDA fixed-charge coverage of more than 5x in 2010, excluding the Alico transaction.
Moody's Investors Service upgraded to B3 from Caa1 the senior unsecured debt ratings of MGIC Investment Corp., the holding company for Mortgage Guaranty Insurance Corp. and MGIC Indemnity Corp. (jointly "MGIC", Ba3 IFS rating). This concludes the rating review on the debt of MGIC Investment Corp, which was initiated on April 21, 2010. The ratings outlook is positive.
The upgrade of the senior debt ratings to B3 reflects MGIC Investment Corp.'s substantially enhanced liquidity position following its $1.1 billion recent capital raise and capital contribution to MGIC, Moody’s says. On July 20, 2010, MGIC disclosed in a SEC form 8K filing that during the second quarter $200 million was contributed to MGIC and that the holding company retains approximately $1 billion of cash and securities as of June 30, 2010. The relatively modest portion of the total capital raise that was down-streamed to MGIC, as well as the group's return to profitability in the second quarter, both suggest that the holding company will be able to maintain meaningful cash resources over at least the near term, which is a positive for creditors.
S&P affirmed its 'B+' FSR and negative outlook on Radian Insurance Inc. (RIC). The rating agency subsequently withdrew its 'B+' FSR on RIC at the company's request. These actions have no impact on the ratings on direct parent company Radian Guaranty Inc. or ultimate parent company Radian Group Inc.
The negative outlook on RIC largely reflects the current macroeconomic environment as well as the increasing litigation risk associated with rescission activity. S&P also expects that adjustable-rate mortgages will reset in increasing amounts through 2010 and 2011; this could cause an increase in delinquencies and losses incurred.
S&P lowered its counterparty credit and FSRs on Reserve National Insurance Co. to 'A-' from 'A'. At the same time, S&P removed the ratings from CreditWatch, where they had been placed with negative implications on Feb. 24, 2010, and assigned a stable outlook. Subsequently, the agency withdrew its ratings on Reserve National at the request of the parent holding company, Unitrin Inc.
Reserve National's pretax statutory return on revenue, which has averaged 9.35% from 2004 through 2008, declined sharply to 4.85% in 2009 from 7.27% in 2008. The decline resulted primarily from higher policyholders' benefits and incurred losses as a percentage of earned premiums as well as higher overall expenses. Furthermore, the company has experienced moderate, yet steady, declines in premium revenue in recent years.
Security Benefit Life Insurance Co. and its affiliate
A.M. Best upgraded the FSR to B+ (good) from B (fair) and ICR to “bbb-” from “bb” of Security Benefit Life Insurance Co. and its affiliate, First Security Benefit Life and Annuity Company of New York (collectively known as Security Benefit Group).
Additionally, A.M. Best upgraded the debt ratings to “bb-” from “b+” on the existing surplus notes issued by Security Benefit Life Insurance Co. All ratings have been removed from under review with positive implications and assigned a stable outlook. Both companies are subsidiaries of Security Benefit Corporation, which will be controlled by a new holding company led by Guggenheim Partners. With the completion of the acquisition transaction by Guggenheim on July 30, 2010, Security Benefit Mutual Holding Corp. has been demutualized.
A.M. Best says the rating actions reflect Security Benefit Group’s improved risk-adjusted capitalization, which is supported by a large cash capital infusion by Guggenheim, enhanced financial flexibility to support new business growth opportunities and the potential improvement in the asset allocation strategy given the benefits of Guggenheim’s investment expertise. A.M. Best also notes that Security Benefit Group’s financial leverage and exposure to a high level of intangible assets associated with the past acquisition of the Rydex Holdings transaction will be lowered as a result of the fresh capital contribution from Guggenheim.
A.M. Best affirmed the FSR of A+ (superior) and ICR of “aa-” of The Toa Reinsurance Co. Ltd.
Concurrently, A.M. Best upgraded the ICR to “a+” from “a” and affirmed the FSR of A (excellent) of The Toa Reinsurance Company of America (TRA). The outlook for all ratings is stable.
The ratings of Toa Re reflect its strong underwriting performance, superior risk-adjusted capitalization and continuous diversification of income sources, A.M. Best says.
Toa Re recorded a combined ratio of 92% with a 5-year average of 94%. In addition to the favorable combined ratio, the company has reduced its peak risk over the previous year, which was the primary cause for a higher loss ratio and high volatility. With the improved risk management, Toa Re expects to maintain the current profitability with lower volatility in underwriting income, according to the rating agency.
TOWER Limited and its subsidiaries
A.M. Best affirmed the ICR of “bbb-”of TOWER Limited. At the same time, A.M. Best has affirmed the FSR of A- (excellent) and ICR of “a-” of TOWER Limited’s subsidiaries, TOWER Insurance Limited, TOWER Health & Life Limited (THL) and TOWER Life Limited (TLNZ). The outlook for all ratings is stable.
The ratings reflect the group’s continued operating profitability and strengthened risk-adjusted capitalization.
TOWER Limited’s after-tax earnings from continued operations increased to NZD 50.1 million in 2009 from NZD 40.5 million in 2008. The notable improvement in operating performance was supported by profit growth in all three business units: general insurance, health and life, and investments, A.M. Best says. In the first half of fiscal year 2010, the group’s net profit after tax from continued operations was NZD 28.1 million, compared to NZD 26.6 million for the same period in fiscal year 2009. Prospectively, A.M. Best says it expects that TOWER Limited’s operating performance will remain favorable as consistent operating profitability from general insurance business and strong organic growth from health and life business will continue to support the group’s operating profitability.
A.M. Best revised the outlook to stable from negative, and affirmed the FSR of A- (Excellent) and issuer credit rating of “a-” of Tri-State Consumer Insurance Co.
The revised outlook reflects Tri-State’s improved risk-adjusted capitalization and profitable operating performance. Theses results are primarily due to a steady stream of net investment income augmented by generally favorable underwriting results, the agency says. In addition, Tri-State maintains a moderate underwriting leverage, conservative operating strategy and solid local market expertise.
A.M. Best believes these positive rating factors are partially offset by Tri-State’s geographic business concentration and elevated expense position. With all of its business produced in New York State, the company is exposed to potential weather related events and stiff competition. These concerns are partially mitigated by prudent catastrophe reinsurance and expense cutting measures, which have lowered the company’s total underwriting expenses in recent years.
S&P lowered its counterparty credit and FSRs on USAble Life to 'A-' from 'A'. The outlook is stable.
The company has taken corrective pricing actions for the dental business segment, which improved in 2009 and the first quarter of 2010, S&P says. The expense ratio should begin to improve by 2011, after the strategic transformation project is complete and systems conversions begin. Growth of new business should also improve scale as the company succeeds in penetrating its Blues partner's books, while S&P expects the expense ratio to fall below 30% in 2010.
The stable outlook reflects the rating agency's expectation that the company's earnings will begin to show improvement following several years of IT upgrades.
Fitch Ratings revised VTB Insurance (Russia)'s (VTBI) outlooks to positive. Its ratings have been affirmed at IFS 'BB' and National IFS 'AA-(rus)'.
The outlook change reflects VTBI's strengthened standalone profile, which includes improvement of its operating performance and capital position through internal sources, Fitch says. The ratings continue to reflect ongoing support from the 100% shareholder, state-owned Bank VTB ('BBB'/Stable), Russia's second-largest bank by assets and equity, access to the parent's distribution network and a good quality investment portfolio. The ratings also take into account the challenges in managing VTBI's rapid premium growth, relatively short track record of sustainable operations and competitive operating environment.
VTBI's operating performance has improved considerably, with the return on adjusted equity rising to 57% in 2009 compared with negative results in 2005 to 2008. This strengthening has primarily been a result of the improved underwriting performance, but has also been supported by favorable investment yield, Fitch says.
Western Underwriters Insurance Co.
A.M. Best has withdrawn the FSR of A- (excellent) and ICR of “a-” and assigned an NR-3 (Rating Procedure Inapplicable) to the FSR and an “nr” to the ICR of Western Underwriters Insurance Co.
These rating actions reflect Western Underwriters’ inactive status as a clean shell as it has no active business writings and holds no loss reserves, according to A.M. Best. The current inactivity stems from the cessation of its relationship with a fronting carrier in 2007 and subsequent decision to suspend the issuance of policies on a direct basis.
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