A.M. Best announced rating actions on Agri General Insurance Company (AGIC) following the acquisition of Rain and Hail Insurance Service Inc. (Rain and Hail) by AGIC’s parent company ACE American Insurance Company, an indirect wholly owned subsidiary of ACE Limited (ACE). ACE had already owned approximately 20% of the outstanding common stock of Rain and Hail when the acquisition was first announced in September.
A.M. Best upgraded the financial strength rating (FSR) to A+ (superior) from A (Excellent) and issuer credit rating (ICR) to “aa-” from “a” of AGIC. Both ratings have been removed from under review with positive implications, and a stable outlook has been assigned to the FSR and a positive outlook to the ICR.
S&P affirmed its 'BBBpi' counterparty credit and financial strength ratings on AGIC. Subsequently, S&P withdrew the ratings. Since Dec. 28, 2010, Agri has been indirectly wholly owned by Swiss insurance and reinsurance holding company ACE Ltd. (A/Stable/--), which is interactively rated by S&P. The rating agency has taken this action to eliminate possible confusion concerning the assignment of pi ratings on companies that are part of interactively rated groups. As of Dec. 28, 2010, Agri is part of an interactively rated group, according to S&P. Although S&P’s interactive ratings include a review of the entire group, Agri had not specifically requested that the agency assign these pi ratings, and maintaining pi ratings on the company might wrongly imply that S&P has access only to public information on it. In accordance with S&P’s surveillance standards, the ratings were affirmed before they were withdrawn.
A.M. Best affirmed the financial strength rating (FSR) of A (excellent) and issuer credit ratings (ICR) of “a+” of Allianz Life Insurance Company of North America and its subsidiary, Allianz Life Insurance Company of New York. Concurrently, A.M. Best has affirmed the FSR of A (excellent) and ICR of “a” of Allianz Life and Annuity Company (ALAC). All three companies are collectively known as Allianz Life. The outlook for all ratings is stable.
The rating affirmations reflect Allianz Life’s strategic position under its ultimate parent, Allianz Societas Europaea (Allianz SE) (Germany), its leading U.S. market position within the fixed index annuity market, strong liquidity, strengthened capital position, improved operating profile, unlevered balance sheet and well-developed risk management practices, A.M. Best says. Additionally, the ratings recognize Allianz SE’s global business profile as a leading financial services company with core business segments in life/health, property/casualty and financial services.
Fitch Ratings affirmed Arch Capital Group Ltd.'s (ACGL) issuer default rating (IDR) at 'A' and the ratings on ACGL's senior unsecured notes and preferred shares at 'A-' and 'BBB', respectively. Additionally, Fitch affirmed the insurer financial strength (IFS) ratings of ACGL's various subsidiaries at 'A+'. The rating outlook is stable.
Fitch's rationale for the affirmation of ACGL's ratings reflects the company's consistently strong profitability, low financial leverage and strong interest and preferred dividend coverage, and consistent favorable loss reserve development. The ratings also reflect the effect of rising combined ratios and reduced underwriting opportunities tied to competitive conditions in many of the company's core business lines.
Fitch Ratings revised Aviva Plc's (Aviva) outlook to stable from negative and affirmed its long-term issuer default rating (IDR) at 'A'.
The rating actions reflect the recovery in Aviva's capital position, driven by financial markets and balance sheet de-risking, Fitch says. By end-H110, total equity had increased to GBP15.8bn (end-2008: GBP14.6bn) and the surplus in Aviva's with-profit (WP) funds, a major component in Fitch's assessment of the group's overall capital strength, had increased to GBP4.2bn (end-2008 2.3bn). By end-Q310, Aviva's regulatory capital (Insurance Groups Directive; IGD) surplus had increased to GBP3.6bn (end-2008: GBP2.0bn).
The ratings reflect the group's diversification across product lines, with a broad range of life, non-life and asset-management products, and across regions.
A.M. Best placed under review with negative implications the financial strength rating (FSR) of A (excellent) and issuer credit ratings (ICR) of “a” of Balboa Insurance Group (Balboa) and its property/casualty members, Balboa Insurance Company (BIC), Meritplan Insurance Company and Newport Insurance Company. In addition, A.M. Best has placed under review with negative implications the FSR of A- (excellent) and ICRs of “a-” of Balboa Life Insurance Company and Balboa Life Insurance Company of New York. All companies are owned by the BA Insurance Group, Inc., which is ultimately owned by Bank of America Corporation (BAC).
The under-review status of the ratings is in response to the Feb. 3, 2011, announcement that a definitive agreement was signed that encompassed the sale of the assets and liabilities of the entities within Balboa by BAC to QBE Insurance Group Ltd. (QBE), with the legal entities remaining with BAC. Although it is anticipated that favorable risk-adjusted capitalization will be maintained by Balboa during the transition of business to QBE, the negative implications contemplate the prospective change in Balboa’s business profile as a risk-bearing entity following the transaction. The ratings will remain under review pending A.M. Best’s further discussions with management and any additional assessment of Balboa as the business migrates to QBE following the close of the transaction. The transaction is expected to be completed in mid-2011.
A.M. Best revised the outlook to stable from negative and affirmed the financial strength rating of A++ (superior) and issuer credit ratings (ICR) of “aa+” of Massachusetts Mutual Life Insurance Company (MassMutual) and its life/health subsidiaries. Concurrently, A.M. Best revised the outlook to stable from negative and affirmed the debt ratings of “aa-” on existing surplus notes and the “aa+” on notes issued under funding agreement-backed securities programs of MassMutual. A.M. Best also affirmed the rating of AMB-1+ on the commercial paper of MassMutual.
The revised outlook reflects the improvement in MassMutual’s statutory earnings and risk-adjusted capitalization during 2010 after experiencing significant investment losses in both 2008 and 2009, the rating agency says. For the period ending Sept. 30, 2010, MassMutual recorded statutory net income of $477 million compared to a net loss of $283 million for full-year 2009. Total adjusted capital (TAC) as of Sept. 30, 2010, increased by almost $1.3 billion from year-end 2009 to $12.3 billion, and MassMutual’s preliminary year-end 2010 regulatory capital ratio is at its highest level in the last five years.
MassMutual’s investment impairment losses have declined to $267 million through Sept. 30, 2010, after incurring approximately $3 billion of impairments during the 2008-2009 timeframe. These losses were triggered primarily by the effects of the recent financial crisis and the associated precipitous decline in the U.S. real estate market. A.M. Best believes additional, near-term impairments will be substantially reduced from prior periods and that statutory earnings will comfortably exceed the expected losses.
The affirmation of MassMutual’s ratings recognizes its continued strong capitalization, favorable reserve mix, diversified operating profile and strong market position in the U.S. life industry.
A.M. Best affirmed the financial strength rating of A++ (superior) and issuer credit ratings of “aaa” of The Northwestern Mutual Life Insurance Company (Northwestern Mutual) and its subsidiary, Northwestern Long Term Care Insurance Company (NLTC). A.M. Best also affirmed the debt rating of “aa” on the outstanding $1.75 billion 6.063% surplus notes due 2040 of Northwestern Mutual. The outlook for all ratings is stable.
The ratings reflect Northwestern Mutual’s leading market position in the U.S. life insurance industry, highly productive career distribution force and superior risk-adjusted capitalization, A.M. Best says. The ratings also consider Northwestern Mutual’s extremely favorable liability profile, solid operating earnings and commitment to mutuality. Northwestern Mutual is one of the largest mutual insurance companies in the United States with over $180 billion in consolidated statutory assets as of December 31, 2010, according to the rating agency. The company’s large block of traditional participating whole life insurance and lack of aggressive product features, such as secondary guarantees on universal life products and living benefit riders on variable annuities, provide for stable, long-term cash flows that contribute to the organization’s steady and highly predictable operating performance.
A.M. Best assigned a financial strength rating of A (excellent) and issuer credit rating of “a” to Patriot Life Insurance Company (Patriot Life), a subsidiary of Frankenmuth Mutual Insurance Company (Frankenmuth). The outlook assigned to both ratings is stable.
The ratings of Patriot Life reflect the formal guaranty issued by Frankenmuth with respect to Patriot Life’s liabilities. In addition, the parent also provides administrative expertise and distribution channels for the growth of Patriot Life’s ordinary life business. A.M. Best anticipates that Patriot Life will begin marketing an ordinary life portfolio through Frankenmuth’s independent agency force. These products are planned to complement the parent’s personal lines property/casualty products.
The ratings also acknowledge the challenges and execution risk associated with a start-up life operation. Currently, Patriot Life is managing a closed block of inforce whole life policies.
A.M. Best assigned debt ratings of “bbb+” to the $400 million 4.70% senior unsecured notes, due 2021 and $350 million 5.95% senior unsecured notes, due 2041, recently issued by UnitedHealth Group Incorporated (UnitedHealth). The outlook assigned to the ratings is stable.
A.M. Best expects the proceeds from this offering to be used by UnitedHealth for general corporate purposes, which may include the repayment of debt. The existing ratings of UnitedHealth and its subsidiaries are unchanged.
These issuances are expected to have a minimal impact on UnitedHealth’s financial leverage as the company repaid $250 million of senior notes, which matured in early February 2011, and has an additional $705 million of senior notes maturing in mid-March 2011. UnitedHealth’s debt-to-capital ratio was 30.1% at December 31, 2010, which was down from 32.1% at year-end 2009, due to strong earnings from operations and declining total debt. Earnings before interest and taxes (EBIT) interest coverage was 16.4 at December 31, 2010, compared to 11.5 at year-end 2009. However, EBIT interest coverage is expected to decline in 2011 as future regulated earnings may decline driven by mandatory rebates and eventually higher medical loss ratios.
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