Moody's affirmed the A3 senior debt and Baa2 subordinated debt ratings of AEGON N.V. (AEGON) and the A1 insurance financial strength (IFS) ratings of AEGON's U.S. life insurance operating companies (collectively AEGON USA). Moody's maintains a negative outlook on all of AEGON's long-term ratings.
Moody's also affirmed the Prime-2 short-term ratings for commercial paper of AEGON N.V and AEGON Funding Co. LLC, and affirmed at Prime-1 the short-term IFS ratings of several AEGON USA subsidiaries. Moody's affirmation follows the approval by the European Commission (EC) in respect of AEGON's EUR3.0 billion recapitalization received from the Dutch State in the last quarter of 2008. As part of this approval, AEGON will implement further changes to its activities to rebalance its business model. Moody's affirmation of the group's A3 senior debt ratings reflects the rating agency's view that most of the measures required by the EC are in line with the previously announced strategy of the group.
AMEX Assurance Co.
A.M. Best affirmed the financial strength rating (FSR) of A (excellent) and issuer credit rating (ICR) of “a” of AMEX Assurance Co. AMEX Assurance is a wholly owned subsidiary of American Express Co. The outlook for both ratings is stable.
The ratings reflect AMEX Assurance’s strong capital position and continued trend of favorable earnings generated by providing insurance products to American Express Cardmembers, A.M. Best says.
AMEX Assurance’s strong capital position is reflective of its conservative investment risk profile and favorable operating results from efficient operations that drove its profit margins. The favorable operating results reflect the company’s low-cost, direct marketing strategy and its emphasis on travel-related and other ancillary insurance coverages offered exclusively to American Express Cardmembers.
A.M. Best affirmed the FSR of A- (excellent) and ICR of “a-” of Blue Cross (Asia-Pacific) Insurance Ltd. The outlook for both ratings is stable.
The ratings reflect Blue Cross’ strong risk-adjusted capitalization, improved investment performance in 2009 as a result of the rebound in the financial markets, and consistent market position as one of the top five insurers in the local medical insurance sector, A.M. Best says.
Blue Cross’ risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), improved in 2009 compared to 2008. In addition to a capital injection of HKD 450 million, full retention of the net earnings and a significant increase in the fair value of investment reserves also contributed to the company’s enhanced capitalization. The adjusted capital and surplus increased to HKD 719 million at year-end 2009, translating into a growth of 61.8% from 2008. Blue Cross’ risk-adjusted capitalization is anticipated to remain solid, supporting its business growth over the near to mid term.
A.M. Best affirmed the FSR of A (excellent) and ICR of “a” of Catlin Insurance Company Ltd. (Bermuda), Catlin Insurance Co. (UK) Ltd. (Catlin UK), Catlin Insurance Co. Inc. (CICI) and Catlin Specialty Insurance Co. (Catlin Specialty).
At the same time, A.M. Best has affirmed the ICR of “bbb” of Catlin Group Ltd. (CGL), the ultimate parent company of the Catlin group, and the debt rating of “bbb” on USD 600 million preferred stock issued by CICL. A.M. Best also affirmed the ICR of “bbb” of Catlin Underwriting (CU) (United Kingdom) and the debt ratings of “bbb-” on USD 27 million subordinated floating rate notes and EUR 7 million subordinated floating rate notes issued by CU. The outlook for all ratings remains stable.
CICL’s consolidated risk-adjusted capitalization is expected to remain strong and supportive of its growth plans in 2010, despite losses from the Chilean earthquake (cost of USD 140 million net of reinsurance and reinstatements) and the Deepwater Horizon oil rig explosion (net cost of USD 40 million).
A.M. Best revised the outlook to negative from stable and affirmed the FSR of A- (excellent) and ICR of “a-” of Farmers Mutual Fire Insurance Co.
The negative outlook reflects Farmers’ weak underwriting and operating earnings due to an increased frequency and severity of catastrophe losses in its operating territory and above average operating expenses, the rating agency says.
The ratings also reflect Farmers’ relatively low underwriting leverage, steady stream of investment income, excellent liquidity and long-standing local market presence in Oklahoma. These positive rating factors are partially offset by the company’s fluctuating underwriting performance, limited product offerings and geographic concentration of risks in Oklahoma.
A.M. Best assigned a debt rating of “a-” to MetLife Inc.’s recent issuance of $3 billion in senior unsecured debt. The rating has been placed under review with negative implications consistent with the under review status of all other existing MetLife ratings. The debt has been offered in the following four tranches: $250 million floating rate notes due in 2013, $1 billion 2.375% senior notes due 2014, $1 billion 4.75% senior notes due 2021 and $750 million 5.875% senior notes due 2041.
The proceeds from the debt offering will be utilized to finance a portion of the approximately $16.1 billion acquisition of American Life Insurance Co.(Alico) from American International Group Inc. A.M. Best anticipates the transaction will close during the fourth quarter of 2010.
Despite an earlier equity raise of approximately $3.6 billion, including the over-allotment option, MetLife’s pro-forma financial leverage remains somewhat elevated for the current rating at approximately 31%.
A.M. Best commented that the ratings of Old Mutual plc (OM) and Old Mutual Life Assurance Co. Ltd. (OMSA) remain unchanged following the group’s announcement that an approach has been made to acquire a controlling stake in Nedbank Group, its South African banking operation. HSBC Holdings plc (HSBC) has proposed to acquire up to 70% of the Nedbank Group shares, with OM granting a period of exclusivity to HSBC, with any agreement subject to approval by both parties and satisfying regulatory requirements.
In A.M. Best’s opinion, Nedbank is significant within the Old Mutual group with any potential sale likely to impact its capital position and business profile. OM continues to implement its strategy, reducing the Group’s complexity and concentrating on its core long-term savings divisions.
The proceeds of any sale are anticipated to reduce the level of Group debt, partially repatriate economic capital to the UK and partially reinvest into South Africa and various emerging markets via OMSA. A.M. Best expects the most valuable benefit to OM is likely to be its stronger financial position and with improved leverage ratios, which would need to be assessed in greater detail.
Timberlake Financial LLC
S&P placed its 'BBB' rating on the notes issued by Timberlake Financial LLC (Timberlake) on CreditWatch with negative implications.
Timberlake is a wholly owned subsidiary of Reinsurance Co. of Missouri (a subsidiary of Reinsurance Group of America Inc.), a corporation licensed as a life insurer in the Missouri. Timberlake was organized for the limited purpose of—among other things—purchasing a surplus note from Timberlake Re, issuing the rated notes, and engaging in other actions that are incidental to and necessary to these purposes.
Timberlake Re is special-purpose financial captive formed in 2006. At closing, Timberlake purchased from Timberlake Re a surplus note. Timberlake uses payments received under the note to make payments on the rated notes. Because of the reinsurance obligations of Timberlake Re, it can retain funds to meet these obligations rather than use them to make payments on the surplus note.
The CreditWatch placement reflects our view that Timberlake is at risk of missing a scheduled payment. Because of investment losses—both realized and on a mark-to-market basis—Timberlake Re has less of a cushion to absorb unfavorable experience related to the ceded policies.
Torus National Insurance Co.
A.M. Best placed the FSR of B+ (good) and ICR of “bbb-” of Torus National Insurance Co. (Torus National) (formerly TIG Indemnity Co.) under review with positive implications.
The rating actions follow the completion of Torus National’s acquisition in July 2010 by Torus Specialty Insurance Co., a subsidiary of Torus Insurance Holdings Ltd. (Torus), from TIG Insurance Co., a holding company that is ultimately owned by Fairfax Financial Holdings Ltd.
Torus National has been in run off since 2002, and its existing insurance liabilities are 100% reinsured by its former parent, TIG Insurance Co., the rating agency says. Torus National is expected to recommence trading in the third quarter of 2010. The ratings of Torus National will remain under review until A.M. Best has assessed Torus group’s plans for the company, including the level of financial support Torus will provide.
