Fitch Ratings has updated its criteria rating report “Insurance Broker Rating Methodology,” which replaces a report with the same title dated Dec. 29, 2009. The criteria report outlines the approach used by Fitch when assessing the effect of funding qualified defined benefit pension plans on U.S. corporate issuers.
According to the report, key rating considerations are:
• Management strength
• Scale and market share
• Track record of acquisition and organic growth strategies
Sensitivity to the Insurance Pricing Cycle
• Commission versus fee-based revenues
• Effect of insurance pricing cycle and economic trends
• Diversified earnings streams
• Growth and stability of earnings and profit margins
• Historical results versus industry peers
Funding and Capital
• Ability to access funds
• Debt levels relative to earnings and cash flow
• Debt service capacity
The principal focus is on the estimation of potential funding needs of qualified defined benefit plans, given the regulatory requirements to fund such plans, in relation to cash flow generation. Funding requirements for qualified defined benefit plans are governed under the Pension Protection Act of 2006 as amended by the Worker, Retiree, and Employer Recovery Act of 2008, as well as under other legislation and rules.
The updated criteria report is available here.
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Corrected December 20, 2010 at 11:46AM: yes