American International Group Inc. and its domestic property/casualty subsidiaries
Fitch Ratings and Moody's Investors Service responded to AIG’s announcement of results for the fourth quarter and full year of 2009. Fitch Ratings placed the 'A+' insurer financial strength (IFS) ratings of American International Group Inc.'s domestic property/casualty subsidiaries on rating watch negative. Fitch has placed the following 'A+' IFS ratings on rating watch negative:
• Chartis Property Casualty Co.
• American Home Assurance Co.
• Chartis Casualty Co.
• Commerce and Industry Insurance Co.
• Granite State Insurance Co.
• Illinois National Insurance Co.
• National Union Fire Insurance Company of Pittsburgh, PA
• New Hampshire Insurance Co.
• The Insurance Company of the State of Pennsylvania
• Chartis Select Insurance Co.
• Landmark Insurance Co.
• Lexington Insurance Co.
• AIU Insurance Co.
• Chartis Specialty Insurance Co.
• Chartis MEMSA Insurance Co.
• Chartis UK Ltd.
• Chartis Overseas Ltd.
AIG's issuer default rating (IDR), the ratings on the company's senior unsecured and hybrid securities, and ratings on AIG's other affiliated insurance and non-insurance companies are not affected by these actions.
Moody's affirmed the ratings of American International Group Inc. Also affirmed were the Aa3 insurance financial strength ratings (IFSRs) of Chartis U.S. and the A1 IFSRs of SunAmerica Financial Group (SFG). The rating affirmations reflect the strong market presence of Chartis and SFG, a general stabilization of these businesses since AIG's credit crisis in 2008, and Moody's understanding that the government will continue to support AIG throughout its restructuring. The rating outlook for AIG and Chartis remains negative. The rating outlook for SFG has been changed to negative from developing, given that these operations are no longer for sale.
The current ratings of AIG and its core subsidiaries reflect uplift from their stand-alone credit profiles given the government support, Moody’s says. The ratings are positioned at levels expected to be appropriate for the group on a stand-alone basis when the restructuring is complete and the government's support and ownership of AIG ends.
A.M. Best Co. upgraded the financial strength rating (FSR) to A (excellent) from B++ (good) and the issuer credit rating (ICR) to “a” from “bbb+“ of Capital City Insurance Co. Inc. The ratings have been removed from under review with negative implications, and assigned a stable outlook.
These rating actions on Capital City specifically reflect the explicit support provided to it by an affiliate, General Casualty Company of Wisconsin, in the form of a loss portfolio reinsurance agreement and a 100% quota share reinsurance agreement, both of which became effective Oct. 1, 2009, the rating agency says. The reinsurance agreements were recently executed following the receipt of regulatory approval.
Liberty Mutual Group Inc. subsidiaries
A.M. Best Co. has withdrawn the FSR of A (excellent) and ICR of “a” of American Ambassador Casualty Co. and Globe American Casualty Co. and assigned a category NR-5 to the FSRs and an “nr” to the ICRs.
These rating actions follow confirmation that each entity was merged into subsidiaries of Liberty Mutual Group Inc. (LMGI), and therefore, no longer exists.
Effective Oct. 21, 2009, American Ambassador Casualty Co. was merged into Peerless Indemnity Insurance Co., while effective Dec. 30, 2009, Globe American Casualty Co. was merged into The Midwestern Indemnity Co.
In April 2009, A.M. Best affirmed the FSRs of A (excellent) and ICRs of “a” of the members of the Liberty Mutual Insurance Cos. pool and Peerless Insurance Company Pool, as well as the ICRs of “bbb” of Liberty Mutual Holding Co. Inc. and LMGI. The outlook for all ratings is negative.
A.M. Best Co. affirmed the FSR of B+ (good) and ICR of “bbb-” of Life Insurance Company of Alabama (LICOA). The outlook for both ratings remains stable.
The rating affirmations reflect LICOA’s established niche in marketing supplemental insurance products primarily via worksite sales in the Southeast, its ongoing favorable operating results and current strategic initiatives to grow premium revenue, the rating agency says.
Principal Financial Global Funding LLC
Standard & Poor's Ratings Services reinstated its 'A+' rating on Principal Financial Global Funding LLC's $65 million Series 43 floating-rate notes. Because of an error, S&P incorrectly withdrew the rating on Feb. 20, 2010.
Moody's Investors Service affirmed the A1 senior debt rating of Progressive Corp. and the Aa2 IFS ratings of its primary insurance operating subsidiaries. In the same action, Moody's changed the outlook on Progressive Corp.'s debt ratings to stable from negative. The outlook on the IFS ratings of the insurance operating subsidiaries remains stable.
The change in outlook to stable for the debt ratings is based on improved liquidity at the parent company, mainly driven by increased invested assets at Progressive Investment Co. Inc. (PICI), Progressive Corp.’s unregulated investment subsidiary, Moody’s says. Progressive's A1 senior debt rating is rated two-notches below the Aa2 IFS ratings of its insurance operating subsidiaries, rather than the typical three notch spread, reflecting additional financial flexibility and support provided by the invested assets held at PICI.
As a result of Unitrin Inc.’s agreement in principle to sell its health insurance subsidiary to Physicians Mutual Insurance Co. (not rated)., Reserve National Insurance Co., S&P has placed its 'A' counterparty credit and financial strength ratings on Reserve National on CreditWatch with negative implications.
Security Benefit Life Insurance Co. and affiliate
Standard & Poor's raised its counterparty credit and financial strength ratings on Security Benefit Life Insurance Co. (SBLIC) and its affiliate, First Security Benefit Life Insurance and Annuity Co. of New York (FSBLIC-NY), to 'BB+' from 'BB'. The ratings remain on CreditWatch with positive implications.
The upgrade reflects SBLIC's announcement that a group of investors led by Guggenheim Partners has indirectly contributed $175 million of capital to SBLIC, S&P says. The rating agency believes that this transaction will ultimately remedy a capital deficiency at SBLIC, and give Security Benefit Corp. access to additional financial resources through Guggenheim. Limited capital constrained SBLIC’s sales in 2009. But, in 2010, S&P expects that SBLIC, with fresh capital, will be able to execute on its growth strategy in core 403(b) markets, a traditional stronghold of the company.
A.M. Best Co. affirmed the FSR of A+ (superior) and ICR of “aa-” of Tokio Marine Pacific Insurance Ltd. (TMPI). The outlook for both ratings is stable.
The ratings reflect TMPI’s track record of positive operating results, prudent investment strategy and consistent growth in surplus. The ratings also acknowledge TMPI’s parent, Tokio Marine & Nichido Fire Insurance Co. Ltd.’s brand name in certain local segments and the explicit support TMPI receives in the form of financial guarantee and reinsurance.
Western Insurance Co. and Western Bonding Co.
A.M. Best Co. downgraded the FSRs to B++ (good) from A- (excellent) and ICRs to “bbb” from “a-” of Western Insurance Co. (WIC) and Western Bonding Co. (WBC). The outlook for all ratings has been revised to negative from stable.
The rating actions follow the analysis of WIC’s underwriting exposure to a sister company, Western Thrift and Loan Inc. (WTL), which was placed under a cease and desist order by the State of Nevada Department of Business and Industry Financial Institutions Division in October 2009. These rating actions also reflect the impact from the economic downturn in the construction industry and the significant underwriting losses and cash outflows associated with the group’s California subdivision bonds.
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