Last week, Fitch Ratings announced numerous rating outlook revisions to negative from stable for U.S. health insurers, including their fixed income and subsidiary insurer financial strength (IFS) ratings.

Aetna Inc.
—Long-term issuer-default rating (IDR) A
—Short-term IDR F1
Aetna Life Insurance Co.
—IFS AA-
Aetna Health Inc. (Maryland, New Jersey, Pennsylvania, Texas, Florida, New York)
—IFS A+
Aetna Health Inc. (Arizona, Colorado, Connecticut, Delaware, Georgia, Maine, Massachusetts, Michigan, Missouri, Ohio, Oklahoma, Tennessee, Washington), Aetna Health of California Inc., Aetna Health of Illinois Inc., Aetna Health of the Carolinas Inc.
—IFS A

Blue Cross Blue Shield of Florida
—Long-term IDR A

Blue Cross of Idaho Health Service Inc.
—IFS A-

CIGNA Corp.
—Long-term IDR BBB+
—Short-term IDR F2
Connecticut General Life Insurance Co., Life Insurance Co. of North America, CIGNA Life Insurance Co. of New York, CIGNA Worldwide Insurance Co.
—IFS A

Coventry Health Care Inc.
—IDR BBB

Health Care Service Corp.
—Long-term IDR A

With these revisions, the rating outlook is now negative for all 12 health insurers rated by Fitch. The six insurers whose outlook remains negative are: Health Insurance Plan of Greater New York, Health Net Inc., Healthmarkets Inc., Humana Inc., UnitedHealth Group Inc. and Wellpoint Inc.

Other ratings actions from A.M. Best and Fitch include:

Amedex Insurance Co. Ltd.

A.M. Best Co. downgraded the financial strength rating (FSR) to B- (fair) from B (fair) and the issuer credit rating (ICR) to bb- from bb+ of Bermuda-based Amedex Insurance Co. Ltd. (Amedex-Bermuda). The outlook for the FSR has been revised to negative from stable, and the outlook for the ICR remains negative.

The downgrading of Amedex-Bermuda reflects A.M. Best’s concerns with its modest risk-adjusted capital position and recent large operating losses. The weak capitalization—relative to the company’s ratings—recognizes the high level of intangible assets (deferred acquisition costs [DAC]) relative to capital. Losses have been incurred as Amedex-Bermuda has continued to write down DAC related to recent issue year universal life policies. The negative outlook reflects A.M. Best’s concern for the potential for additional DAC write downs and further operating losses. However, A.M. Best notes that Amedex-Bermuda’s capitalization has been stabilized through capital contributions by its ultimate parent, The British United Provident Association Ltd.


Apollo Casualty Co. of Florida

A.M. Best Co. assigned a FSR of C++ (marginal) and ICR of "b" to Apollo Casualty Co. of Florida (ACCF). The outlook assigned to these ratings is negative.

Concurrently, A.M. Best affirmed the FSRs of C++ (marginal) and ICRs of “b” of American General Holdings Group (American General), its member, Apollo Casualty Co. (Apollo Casualty) and American General’s separately rated affiliate, Delphi Casualty Co. (Delphi Casualty). The outlook for these ratings is negative.& t; r />
The rating actions for ACCF reflect its elevated underwriting leverage, limited business profile, combined with significant premium growth since its inception in 2007. In addition, the ratings reflect the company’s geographic concentration of risk, principally in the southern Florida market, limited product offerings with writings consisting predominantly of non-standard automobile coverages and ACCF’s above-average expense structure. Due to the marginal risk-adjusted capital position of ACCF and its parent company, Apollo Casualty, the rating outlook is negative.


Grain Dealers Mutual Insurance Co.

A.M. Best Co. placed the FSR of B (fair) and ICR of “bb” of Grain Dealers Mutual Insurance Co. under review with developing implications.

These rating actions follow the announcement that Grain Dealers and Main Street America Group Inc. have entered into an affiliation agreement that has been approved by both companies’ boards of directors. This agreement is subject to regulatory approval from the Indiana Department of Insurance. The companies’ anticipate the affiliation to be finalized in early fourth quarter 2009. The ratings and outlook for Main Street and its subsidiaries are unchanged.


Hallmark County Mutual Insurance Co.

A.M. Best Co. assigned an FSR of A- (excellent) and an ICR of “a-” to Hallmark County Mutual Insurance Co. (HCM) (formerly known as State and County Mutual Fire Insurance Co.). The outlook assigned to both ratings is stable.

The ratings assigned to HCM reflect the operating support provided by American Hallmark Insurance Co. of Texas (AHIC) through its 100% quota share reinsurance contract, the rating agency says. AHIC is a member of Hallmark Insurance Group. Hallmark and its members have an FSR of A- (excellent) and ICRs of “a-”.


International General Insurance Co. Ltd. and International General Insurance Holdings Ltd.

A.M. Best Co. affirmed the FSR of A- (excellent) and ICR of “a-” of International General Insurance Co. Ltd. (IGI). A.M. Best also affirmed the ICR of bbb- of International General Insurance Holdings Ltd. (IGIH). The outlook for all ratings is stable.

The ratings reflect IGI’s resilient risk-adjusted capitalization and improving business profile. Offsetting factors are the company’s poor underwriting performance in 2008 and the impact of the economic downturn that may restrict premium volumes in spite of a hardening of rates, according to A.M. Best.

Mutual of America Life Insurance Co. 

Fitch Ratings affirmed the AA- IFS rating of Mutual of America Life Insurance Co. (MOA). The Rating Outlook is stable.

This rating action follows Fitch's updated review of MOA's capitalization, liquidity, financial flexibility and operating performance.

MOA's rating continues to be based on the company's strong balance sheet fundamentals. Fitch views the risk profile of MOA's investments as conservative. The company's investment risk is primarily concentrated in its corporate bond portfolio, which made up about 34% of invested assets at year-end 2008. Fitch notes that the company's corporate bond exposure is underweight in the troubled financial services industry. Exposure to below-investment grade bonds (BIGs)—13% of statutory capital at year-end 2008—is low relative peers and is due entirely to fallen angels. Based on its investment policy, MOA does not buy BIGs. The balance of the company's invested assets is concentrated in U.S. government-related securities, including agency residential mortgage-backed securities, which accounted for 55% of invested assets at year-end 2008.


Senior Health Insurance Co. of Pennsylvania

A.M. Best Co. affirmed the FSR of C (weak) and ICR of ccc+ of Senior Health Insurance Co. of Pennsylvania (SHIP, formerly known as Conseco Senior Health Insurance Co.). The outlook for both ratings is negative.

Concurrently, A.M. Best withdrew the ratings at the company’s request, and assigned a category NR-4 to the FSR and “nr” to the ICR. This rating action reflects the decision of SHIP’s management to withdraw from A.M. Best’s interactive rating process.

Despite continued statutory operating losses ($37 million in the first quarter of 2009), SHIP’s current absolute and risk-adjusted capitalization is adequate. A.M. Best believes that SHIP will likely require a combination of rate increases, reduced benefits and policyholder forfeitures to maintain sufficient capitalization over the long term. Additionally, as a private company, SHIP has no access to additional capital. A.M. Best notes that SHIP should benefit from lower expenses going forward as it operates without a profit motive.


XL Re Life America Inc.

A.M. Best Co. has commented that the FSR of A- (excellent) and ICR of “a-” of XL Re Life America Inc. (XL Re Life) is unchanged following the announcement by SCOR Global Life U.S. Re Insurance Co. (SGL U.S.), a wholly owned subsidiary of the SCOR Group, that it had reached a definitive agreement to acquire XL Re Life. XL Re Life is ultimately owned by XL Capital Ltd. The outlook for both ratings is stable.

The transaction with SGL U.S. is expected to close on September 30, subject to regulatory approval and normal closing conditions. The acquisition is valued at approximately $45 million, and the consideration is to be paid in cash. This transaction is consistent with XL Capital’s strategic review of its life reinsurance operations, which were deemed to be non-core. SCOR’s U.S. life reinsurance operations are currently rated A- (Excellent).

Should the transaction not be completed as expected, the FSR and ICR of XL Re Life may be downgraded to a rating level commensurate with its stand-alone profile, A.M. Best says.

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