A.M. Best upgraded the financial strength rating to A (excellent) from A- (excellent) and issuer credit rating (ICR) to “a” from “a-” of American Physicians Insurance Co. (API). Both ratings have been removed from under review with positive implications and assigned a stable outlook.
The rating actions follow the acquisition of American Physicians Service Group Inc. (APS), the parent company of API, by ProAssurance Corp. (PRA) on Nov. 30, 2010. As a new subsidiary of PRA, API will benefit from the financial flexibility and support that PRA has consistently provided to its operating companies. The ratings and outlook also reflect API’s strong risk-adjusted capital position, favorable operating performance, experienced management team and high policyholder retention levels, A.M. Best says.
A.M. Best also withdrew the ICR of “bbb-” of APS and assigned a category “nr” to the ICR. With the acquisition, APS became an intermediary holding company within the PRA organization, and APS’ common stock has been de-listed from the NASDAQ Stock Market.
Fitch affirmed the 'A-' insurer financial strength rating of Associated Electric & Gas Insurance Services Limited (AEGIS). The rating outlook is negative. Fitch has subsequently withdrawn AEGIS' ratings.
The affirmation considers AEGIS' significantly improved operating performance and increased capital levels over the past 18 months.
The negative rating outlook reflects Fitch's concerns about prolonged, very competitive market conditions in AEGIS' key business lines that are pressuring results industry-wide and will challenge AEGIS to sustain or further improve upon underwriting results.
Fitch no longer considers AEGIS' rating to be relevant to its coverage.
Aviva PLC U.S. subsidiaries
S&P lowered its counterparty credit and financial strength ratings on Aviva PLC's U.S. insurance subsidiaries Aviva Life and Annuity Co. and Aviva Life and Annuity Co. of New York (collectively referred to as Aviva USA) to 'A+' from 'AA-'. The outlook is negative.
The rating agency believes the U.S. insurance operations are strategically important to Aviva PLC (A/Negative/--), recognizing their focus on the key segments of life insurance and retirement services in the largest life insurance market in the world. The U.S. insurance operations were identified as one of Aviva group's 12 key markets in its recent strategy update to the market. In S&P’s opinion, however, the insurance subsidiaries' operating earnings, while improving, are likely to remain below the level that the rating agency would expect to see generated by core operating companies as defined by its group methodology. More specifically, the return metrics generated by the U.S. operations are the lowest of the handful of subsidiaries that S&P defines as core operations of the Aviva group.
The negative outlook on Aviva USA mirrors that on the major life insurance subsidiaries within Aviva PLC, given S&P now views the U.S. insurance operations as strategically important subsidiaries to Aviva PLC under group methodology criteria. The rating agency expects the company to maintain its very strong franchise position in equity indexed annuities in the U.S. with sales that remain in line with industry trends and IFRS pretax operating earnings of at least $250 million in 2011 and investment impairments at or better than the levels seen in 2010, for 2011.
Avondale Securities SA
Moody's placed the A3 (sf) long-term rating of the Class A-1 Emergence Offset Notes (senior tranche), as well as the Baa3 (sf) long-term rating of the Class A-2 Notes (junior tranche) under review for possible downgrade. Emergence Offset Notes are the life insurance-linked notes issued by Avondale Securities SA, a special purpose Luxembourg societe anonyme sponsored by Bank of Ireland. The repayment of the notes references future profits expected to emerge from a book of life insurance and pension unit-linked policies originated by New Ireland Assurance Company plc (trading as Bank of Ireland Life), a wholly owned subsidiary of Bank of Ireland.
The rating action follows the recent market confidence issues faced by several Irish banks, including Bank of Ireland, as well as Moody's review for possible downgrade of Bank of Ireland's ratings and the new austerity measures decided by the Irish government, all of which may have direct and indirect negative impact on future profits to emerge from the securitized book of business. A deterioration of the Value-In-Force (VIF) could have a negative impact on the expected loss posed to the noteholders, especially for the most junior tranche, bearing in mind its relative small size (EUR20 million).
Moody's said that, despite the recent provision of additional external support for the main Irish banks, market confidence issues recently faced by Bank of Ireland and some of its competitors may create a reputational risk, which could potentially affect the market position and profitability of Bank of Ireland Life. Since a high proportion of life products are sold through the banking channel, any event affecting the bank may have a direct effect on the ability of the insurance operation to sustain its current level of activity. This could also trigger a spike in lapses in the existing book of business, including the securitized book, which would have negative implications on the surplus to emerge from this book, and therefore negative implications for the Notes' ratings.
Moody’s and S&P assigned ratings to CIGNA Corp.'s issuance of $250 million of new 10-year maturity debt. According to sources, the company will use the proceeds from the notes, in association with a tender offer, to redeem its notes that are maturing in 2019 and for general corporate purposes.
Moody's assigned a Baa2 senior unsecured debt rating to the debt issuance. The outlook on the rating is stable.
Moody's said that as a result of CIGNA’s plans to use the net proceeds to fund the tender offer for its 8.5% notes due in 2019 and for general corporate purposes, CIGNA's financial leverage (debt to capital, where debt includes pension obligations and operating leases) is not expected to change appreciably from its current level of approximately 44.4% as of Sept. 30, 2010.
S&P assigned its 'BBB' rating on CIGNA issuance. The ratings on CIGNA (BBB/Stable/A-2) are based on the company's strong consolidated competitive position and operating performance, good financial flexibility, and limited exposure to the provisions of the recently enacted health care reform legislation, the rating agency says. Partially offsetting these strengths are CIGNA's significant commercial mortgage loan holdings and its high exposure to equity market conditions through its run-off reinsurance business and unfunded pension and postretirement obligations.
S&P affirmed its 'BB-' rating on Crawford & Co.'s planned senior secured term loan due in October 2013 following the incremental $50 million issuance. At the same time, S&P affirmed the 'BB-' counterparty credit rating and maintain the stable outlook.
The rating agency expects the $50 million borrowings under the incremental term loan will be priced at LIBOR plus 325 basis points. The increase will stand pari passu with the company's existing senior secured credit facility and will be subject to the same amended financial covenant maintenance performance, S&P says.
The rating agency does not believe that the increase will change Crawford's debt-servicing capabilities significantly, although leverage metrics will deteriorate reflecting the additional borrowings. Crawford has indicated that it will use the proceeds to make a contribution to the U.S. pension plan, which is $158 million underfunded as of Oct. 31, 2010. The company aims to fully fund its pension obligation by 2016. The 'BB-' counterparty credit rating on Crawford reflects the claims administrator's high debt leverage, weak quality of capital, and limited financial flexibility.
Executive Insurance Co.
A.M. Best has withdrawn the financial strength rating (FSR) of B++ (good) and issuer credit rating (ICR) of “bbb” of the Executive Insurance Co. (EIC) and assigned an NR-3 (Rating Procedure Inapplicable) to the FSR and an “nr” to the ICR.
These rating actions reflect EIC’s inactive status as it has no active business writings and holds no loss reserves, as of its Sept. 30, 2010, third-quarter statement.
S&P withdrew its 'AA+' counterparty credit and financial strength ratings on General Reinsurance UK Ltd. (GRUK).
This rating action follows the transfer of all assets and liabilities of GRUK to an affiliate, the U.K. branch of General Reinsurance AG (GRAG; formerly Cologne Re), and the dissolution of GRUK, which occurred on Nov. 30, 2010, the rating agency says. General Reinsurance Corp. has issued a guarantee for in-force GRUK business transferred to GRAG. The guarantee replaces a preexisting guarantee that covered GRUK's past and ongoing business. General Re took these actions as part of an ongoing initiative to simplify its business structure.
A.M. Best assigned indicative ratings of “a-” to senior unsecured debt, “bbb+” to subordinated debt and “bbb” to preferred stock and trust preferred securities, which may be issued under the recently filed and approved shelf registration statement of MetLife Inc. The outlook assigned to all ratings is negative.
The assigned ratings to the securities, which may be issued under the shelf registration statement, are consistent with the current ratings of MetLife’s outstanding securities.
The new shelf registration replaces MetLife’s previous shelf registration filed in November 2007, which has expired, A.M. Best says. Consequently, the ratings for the previous shelf registration have been withdrawn.
MetLife’s issuer credit rating of “a-”, its existing debt ratings and the ratings of its insurance operating entities are all unchanged.
Old Republic International Corp. subsidiaries
A.M. Best affirmed the financial strength rating (FSR) of A+ (superior) and issuer credit ratings (ICR) of “aa-” of Old Republic Insurance, Bituminous Insurance Cos. (Bituminous) and their respective property/casualty members. In addition, A.M. Best affirmed the FSR of A + (superior) and ICR of “aa-” of Great West Casualty Co. (Great West). The outlook for all the above ratings is negative.
Concurrently, A.M. Best affirmed the FSR of A (excellent) and ICRs of “a+” of Old Republic General Insurance Corp. (ORGENCO), Old Republic Title Insurance Group (ORTIG), and its members, Old Republic Surety Co. (ORSC) and Old Republic Insurance Company of Canada. The outlook for the FSRs is stable, while the outlook for the ICRs is negative. A.M. Best also upgraded the FSR to A (excellent) from A- (excellent) and the ICRs to “a” from “a-” of The PMA Insurance Group (PMA) and its property/casualty members. Additionally, A.M. Best has upgraded the ICR to “bbb” from “bbb-” and debt ratings of PMA Cos. Inc.
Both the group and company’s ratings have been removed from under review with positive implications and assigned a stable outlook.
A.M. Best also downgraded the FSR to B++ (good) from A- (excellent) and the ICR to “bbb” from “a-” of Old Republic Security Assurance Co. (ORSAC). The outlook for both ratings has been revised to stable from negative.
At the same time, A.M. Best affirmed the FSR of A (excellent) and ICR of “a” of Old Republic Union Insurance Co. (Old Republic Union) and the FSR of A- (excellent) and ICR of “a-” of Old Republic Life Insurance Co. The outlook for these ratings is stable. All companies above are subsidiaries of Old Republic International Corp.
These ratings reflect A.M. Best’s review of the amount of deterioration in the consolidated financial condition and financial flexibility of Old Republic Corp. since 2007.
A.M. Best commented that the financial strength rating of A (excellent) and issuer credit ratings of “a” of United Fire & Casualty Group (UFG) and its members, led by United Fire & Casualty Co., are unchanged following the announcement of a merger agreement under which UFCS will acquire all of the outstanding shares of Mercer Insurance Group Inc. (Mercer Inc.). The outlook for these ratings is negative.
Under the terms of the agreement, UFCS will pay $28.25 per share in cash, with an aggregate transaction value of approximately $191 million, excluding transaction costs. The acquisition is expected to close during the first quarter of 2011.
The acquisition affords UFG an opportunity to expand geographically and increase the scale of its operations. Mercer Inc.’s underwriting expense ratio is anticipated to benefit from deployment of UFG technology.
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Corrected December 7, 2010 at 12:30PM: yes