S&P placed its 'AA-' long-term counterparty credit and insurer financial strength (IFS) ratings on AXA Insurance U.K. PLC (AXA Insurance U.K.), a subsidiary of France-based insurer AXA group (AXA), on CreditWatch with negative implications. The CreditWatch placement reflects the rating agency’s view of the announced partial disposal of the U.K. life portfolio and its potential implications for AXA's overall presence in the U.K.
S&P bases the 'AA-' rating on AXA Insurance U.K. on its assessment of this subsidiary as a core operating entity within AXA. The rating agency lowered its long-term counterparty credit and insurer financial strength ratings to 'A+' from 'AA-' on U.K.-based AXA Sun Life PLC (AXA Sun Life) a subsidiary of AXA. The outlook is stable.
While the rating agency says it understands that the property/casualty operations under AXA Insurance U.K. would not be affected by the planned partial disposal, the partial disposal of the life portfolio would put further strain on AXA Insurance U.K.'s P&C business and financial profile and its contribution to group earnings and geographic reach.
A.M. Best upgraded the financial strength rating (FSR) to A (excellent) from A- (excellent) and the issuer credit rating (ICR) to “a” from “a-” of Central Reinsurance Corp. (Central Re). The outlook for both ratings is stable.
The rating actions reflect Central Re’s rapid restoration of its capital level, continuous improvement in risk management and stable operating performance, A.M. Best says. The ratings also factor the company’s ability to execute its overseas expansion plan and the improvement in the underwriting results of its overseas portfolio.
A.M. Best upgraded the FSR to A (excellent) from A- (excellent) and the ICR to “a” from “a-” of Farmers’ Mutual Group (FMG) and its subsidiary, FMG Insurance Limited (FMGIL). The outlook for all ratings has been revised to stable from positive.
The ratings of both FMG and FMGIL reflect the group’s improvement in operating profitability and its strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), A.M. Best says. The ratings also acknowledge the shift in strategic focus by management over the past three years, which drove the improvement in the underwriting margin.
Moody and S&P took action on Lincoln National Corp. (LNC).
Moody’s assigned Baa2 (stable outlook) debt ratings to LNC’s $750 million issuance of fixed rate senior unsecured notes ($250 million maturing in 2015 and $500 million maturing in 2040). The notes are a drawdown from a shelf registration filed in March 2009.
S&P affirmed its 'A-' counterparty credit rating on Lincoln National Corp. and its 'AA-' counterparty credit and FSRs on LNC's insurance operations. S&P also raised its rating on Lincoln National Capital VI and the preliminary rating on LNC's preferred stock to 'BBB' from 'BBB-'. The outlook on all these companies remains stable.
LNC has announced a capital plan related to its repayment of $950 million in TARP CPP proceeds that the company obtained last year. LNC will use a mix of equity, debt, and cash for the repayment, including $335 million in common equity, $250 million in aforementioned senior notes, and $365 million in excess cash, mostly from the proceeds of recent asset sales.
S&P views the funding mix favorably, saying it will improve LNC's financial leverage and fixed-charge coverage while preserving sufficient excess cash that LNC could use to support the capital needs of its insurance operations if needed.
Moody’s says LNC's repayment of the CPP preferred stock is an additional indication of the company's improved financial flexibility.
Moody’s and S&P reacted to the announcement that Marsh McLennan Cos.’ (MMC) Mercer Inc. subsidiary reached a $500 million settlement agreement with the Alaska Retirement Management Board, $100 million of which is expected to be recoverable by insurance, on behalf of two Alaska benefit plans relating to work in the 1992 to 2004 period.
Moody's affirmed the ratings of MMC. Moody's believes that MMC will generate ample proceeds from the pending sale of Kroll Inc. ($1.13 billion cash transaction expected to close by late September 2010) to cover the net cost of the ARMB settlement and to pay off a meaningful amount of debt. The rating outlook for MMC is stable.
S&P revised its outlook on MMC to negative from stable. At the same time, it affirmed its 'BBB-' long-term and 'A-3' short-term counterparty credit ratings on the company. The rating agency contends the settlement removes significant uncertainty relative to this lawsuit, but the settlement amount raises potential concerns with regard to Mercer's reputation and competitive position on a prospective basis.
A.M. Best and Moody’s responded to the announcement that PMA Capital Corp. and Old Republic International Corp. have entered into a merger agreement, pursuant to which Old Republic will acquire all of PMA Capital’s outstanding stock.
A.M. Best placed under review with positive implications the issuer credit rating (ICR) of “bbb-” and debt ratings of PMA Capital.
Concurrently, A.M. Best placed under review with positive implications the FSR of A- (excellent) and ICRs of “a-” of The PMA Insurance Group (PMA) and its pooled members. A.M. Best also expects that with the close of the transaction, PMA will receive certain explicit support from Old Republic, while achieving greater scale and eliminating costs associated with being a public company.
Moody's affirmed the ratings of Old Republic International and its key property/casualty subsidiaries and has placed the ratings of PMA Capital Corp. on review for possible upgrade. The outlook for Old Republic International and its property and casualty subsidiaries is stable. The ratings of Old Republic's title insurance and mortgage insurance subsidiaries were not affected by this action.
Moody’s says the addition of PMA, with its weaker credit profile, is an incremental credit negative for Old Republic. However, given the relatively small size of PMA's book of business in relation to Old Republic's total revenue and capital, Old Republic should be able to absorb PMA without straining its current credit profile.
Toyota Motor Insurance Co.
A.M. Best Co. affirmed the FSR of A- (excellent) and ICR of “a-” of Toyota Motor Insurance Co. (TMIC) (Cedar Rapids, IA). The outlook for both ratings is stable.
The ratings reflect the company’s adequate capitalization and improved operating performance, the agency says. TMIC’s ultimate parent has consistently provided financial support to its subsidiary in order for it to maintain its current rating level. TMIC plays a strategic role as the insurer to providers of vehicle service agreements and guaranteed auto protection sold through Toyota, Lexus and affiliated dealerships throughout the United States.
Moody's assigned Euro Medium Term Note (EMTN) Programme ratings of A3 and Baa1, and Baa1 and Baa2 (stable outlook) to the Type A Capital Notes and Type B Capital Notes respectively which can be issued by Zurich Insurance Company Ltd. (ZIC) under its updated $15 billion EMTN Programme. Moody's affirmed the Programme's senior and subordinated debt ratings of A2 and A3 respectively (stable outlook).
With regard to the Type A Capital Notes, Moody's said the rating for a specific drawdown would depend on the existence of a mandatory interest deferral "Trigger Event" as is defined in the EMTN prospectus ("Trigger Event"). In the absence of such a Trigger Event, the Notes would be rated A3 reflecting their subordinated nature, ranking pari passu with existing dated and undated subordinated debt. If a Trigger Event is included and the Note is specified as being Cumulative, then the Notes would be rated Baa1.
