Associated Electric & Gas Insurance Services Ltd.
A.M. Best Co. downgraded the financial strength rating (FSR) to A- (excellent) from A (excellent) and issuer credit rating to “a-” from “a” of Associated Electric & Gas Insurance Services Ltd. (AEGIS). Both ratings have been removed from under review with negative implications and assigned a stable outlook.
These rating actions are due in part to the unexpected large decline in the company’s surplus as of Dec. 31, 2008, compared to year-end Dec. 31, 2007. The ratings were placed under review with negative implications on April 3, 2009, following a significant decline in AEGIS’ total capital at year-end 2008 due to a reported net loss that included significant investment related realized losses and impairment charges, which produced a $323.4 million or 30% erosion in policyholders’ surplus in 2008.
Assured Guaranty Ltd.
Assured Guaranty Ltd. continues to face negative credit migration within the combined insured portfolio, primarily related to structured finance, outpacing the company's ability to build capital resources through earnings retention, according to Fitch Ratings, which downgraded the IFS rating of Assured Guaranty Corp. (AGC) to AA from AAA. Additionally, Fitch downgraded the IFS rating of Assured Guaranty Re Ltd. (AG Re) to AA- from AA, and the debt ratings of the U.S. holding company, Assured Guaranty US Holdings Inc. All affected ratings are on Rating Watch Evolving.
At present, Fitch views AGC's level of capitalization as consistent with IFS ratings in the AA category. Further, AGC remains exposed to additional credit deterioration in its insured portfolio, including the potential for emerging credit pressures in its insured portfolio of municipal credits, Fitch says.
Atlanta Life Insurance Co.
A.M. Best Co. downgraded the FSR to B (fair) from B+ (good) and issuer credit rating to bb+ from bbb- for the Atlanta Life Insurance Co. Atlanta Life is the life insurance member of Atlanta Life Financial Group Inc. The outlook for both ratings has been revised to stable from negative.
The rating actions reflect the considerable decline in the absolute capital and surplus level incurred in 2008 due to investment losses in its unaffiliated common stock portfolio, write-offs of inter-company balances and overall net operating losses, A.M. Best says.
Atradius Trade Credit Insurance Co., New Jersey
A.M. Best Co. assigned an FSR of A (excellent) and an issuer credit ratings (ICR) of “a” to Atradius Trade Credit Insurance Co., New Jersey (ATCI-NJ). The outlook assigned to both ratings is stable. ATCI-NJ is a wholly owned subsidiary of Atradius Trade Credit Insurance Inc., which has an FSR of A (excellent) and an ICR of “a”.
The ratings assigned to ATCI-NJ reflect the operating support provided by ATCI through its 100% quota share reinsurance contract and its service agreement with ATCI-NJ.
AXA Canada Inc.’s Property/Casualty Subsidiaries
A.M. Best Co. has affirmed the FSR of A (excellent) and ICR of “a” of AXA Assurances Inc. and its wholly owned subsidiaries, AXA Insurance, AXA Pacific Insurance Co., AXA General Insurance Co. and AXA Assurances agricoles Inc. A.M. Best also affirmed the FSR of A- (excellent) and ICR of “a-” of InnovAssur, assurances generales Inc. Concurrently, A.M. Best has affirmed the ICR of bbb of the parent holding company, AXA Canada Inc. The outlook for all ratings is stable.
The ratings of AXA Assurances Inc. are primarily a reflection of its profitable operating performance, geographic and product line diversification, stable reserve development, knowledgeable management team and market leadership position in the Canadian property/casualty industry, A.M. Best says.
CIGNA Corp.’s Senior Unsecured Notes
A.M. Best Co. has assigned a debt rating of bbb to $350 million 8.5% senior unsecured notes, due May 2019 of CIGNA Corp. The rating outlook is negative.
The proceeds from the offerings may be used to repay some or all of the outstanding commercial paper and for general corporate purposes, according to the rating agency. The outstanding commercial paper as of March 31, 2009 totaled $373 million, with a weighted average maturity of 19 days and a weighted average interest rate of 2.7% per annum.
This rating action reflects CIGNA’s strong operating performance in its core health care segment and good financial flexibility. Although CIGNA’s financial leverage had increased to 39% as of March 31, 2009, A.M. Best expects the leverage to decline to a level of approximately 30% by year-end 2009. The debt service coverage remains at an adequate level of nearly eight times earnings before interest and taxes (EBIT). Additionally, the earnings in the health care segment have remained fairly stable despite the economic outlook and market challenges.
Fitch Ratings also assigned a BBB rating to Cigna Corp.'s (Cigna) issuance of $350 million 10-year 8.5% senior unsecured notes. However, the rating outlook from Fitch remains stable.
On April 13, 2009, Fitch downgraded all of Cigna's ratings including its senior debt rating to BBB from BBB+. Fitch's rationale included a decline in shareholder's equity during 2008 due largely to an $861 million postretirement benefits liability adjustment and unrealized declines in asset values, Cigna's exposure to equity markets through its run-off variable annuity (VA) business and defined benefit pension plans which have driven recent volatility within the company's balance sheet, and the extended period of higher leverage and modestly lower operating company capital levels than targeted.
DTRIC Insurance Co. Ltd.
A.M. Best Co. affirmed the FSR of A- (excellent) and the ICR of “a-” of DTRIC Insurance Co. Ltd. The outlook for both ratings is stable.
The ratings reflect DTRIC’s continued improvement in capitalization, well-established agency relationships and stable claim experience. The ratings also recognize the financial support of Aioi Insurance Co. Ltd. through its participation on DTRIC’s major reinsurance arrangement and distribution channel, where DTRIC enjoyed a competitive advantage in developing automobile business with Toyota Motor Corp.—Aioi’s majority shareholder.
The Hanover Insurance Group Inc. and Subsidiaries
A.M. Best Co. upgraded the financial strength rating (FSR) to A (excellent) from A- (excellent) and issuer credit ratings (ICR) to “a” from “a-” of Hanover Insurance Group Property and Casualty Cos. and its members. Additionally, A.M. Best upgraded the ICR to bbb from bbb- and debt ratings to bbb from bbb- for senior debt and to bb+ from bb for capital securities of the publicly traded holding company, The Hanover Insurance Group Inc. The outlook for these ratings has been revised to stable from positive.
The upgrades reflect Hanover’s excellent risk-adjusted capitalization, stemming from improved operating earnings and the elimination of dividends paid to THG from 2003 through 2007. In recent years, Hanover has sustained profitability and retained surplus through improved underwriting performance and favorable reserve development. The ratings further reflect the improved financial leverage and financial flexibility at THG since 2003.
Sammons Financial Group (Midland National Life and North American Co. for Life & Health Insurance)
Fitch Ratings downgraded to A from AA- the IFS ratings of Midland National Life Insurance Co. and North American Co. for Life and Health Insurance (NACOLAH). The Rating Outlook is negative for both companies.
The downgrade of the ratings of Midland and NACOLAH, collectively referred to as the Sammons Financial Group (SFG), reflects Fitch's ongoing concern regarding the companies' exposure to the current credit market turmoil, and their impact on SFG's earnings and capital. Particular areas of concern in SFG's investment portfolio are its above-average exposure to structured securities such as asset-backed securities, commercial mortgage backed securities, as well as a growing exposure to limited partnership investments.
Old Glory Insurance Co.
A.M. Best Co. has upgraded the FSR to B++ (good) from B+ (good) and ICR to bbb from bbb- of Old Glory Insurance Co. The outlook for both ratings is stable.
The ratings recognize Old Glory’s solid capitalization, improved underwriting performance, the operational efficiencies derived from claims and underwriting through affiliated entities, the ongoing support it receives from the parent holding company, Heartland Security Insurance Group (Heartland Security) and management’s underwriting expertise within its niche workers’ compensation marketplace.
Torus Specialty Insurance Co.
A.M. Best Co. affirmed the FSR of A- (excellent) and the ICR of “a-” of Torus Specialty Insurance Co., formerly known as Praetorian Specialty Insurance Co. The outlook for these ratings is stable.
This action removes the under review with negative implications applied to Praetorian Specialty on Oct. 1, 2008, following the agreement of Torus Insurance Holdings Ltd. to acquire the company from its immediate parent, Praetorian Insurance Co., a subsidiary of QBE Insurance Group Ltd. Subsequent to the purchase, the company changed its name to Torus Specialty Insurance Co.
Torus Specialty was acquired as a shell company, with Praetorian reinsuring all underwriting liabilities in respect of contracts written prior to the company’s purchase by Torus Insurance Holdings. Additionally, QBE provides a comprehensive guarantee on all Torus Specialty liabilities relating to the period prior to the company’s purchase and against the failure of Praetorian to meet its reinsurance obligations to Torus Specialty.
A.M. Best anticipates that Torus Specialty will maintain strong risk-adjusted capitalization, based on conservative performance expectations. The company was initially capitalized at $50 million provided by Torus Insurance (Bermuda) Ltd.
United Guaranty Residential Insurance Co.
Fitch Ratings downgraded the Insurer Financial Strength (IFS) rating of United Guaranty Residential Insurance Co. (UGRIC) to BBB from AA-, and placed the rating on Rating Watch Evolving.
The rating action reflects the announcement by American International Group Inc. (AIG) that it will be accelerating the process of positioning AIU Holdings Inc. and AIU Holdings LLC (collectively AIU) as an independent entity by transferring the company to a special purpose entity and that, as part of the process, AIG intends to purchase AIU's ownership interest in United Guaranty Corp., UGRIC's immediate parent company.
While UGRIC continues to maintain explicit capital support in the form of a net worth maintenance agreement with AIG, and a substantial stop-loss treaty with an AA- rated insurance company of AIU, Fitch believes that the announced restructuring reduces the level of support for UGRIC and raises uncertainty as to AIG's strategic intent with respect to the U.S. mortgage insurance operations. Consequently, today's rating action reflects Fitch's assessment of UGRIC on a stand-alone basis, inclusive of current capital support agreements.
Utica First Insurance Co.
A.M. Best Co. upgraded the FSR to A (excellent) from A- (excellent) and ICR to “a” from “a-” of Utica First Insurance Co. The outlook has been revised to stable from positive.
According to the rating agency, the actions reflect Utica First’s successful underwriting initiatives that have led to six years of consistently profitable underwriting results; the company’s strong return measures and loss ratios that are favorable to its commercial casualty peers; and strong capitalization that has consistently improved over a five-year period.
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