Argo Group International Holdings Ltd. and its subsidiaries
A.M. Best Co. affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of Argo Re Ltd. and its U.S. subsidiaries. A.M. Best also affirmed the ICR of “bbb” of the parent holding company, Argo Group International Holdings Ltd. The outlook for all ratings is stable.
These ratings reflect Argo Re’s supportive capitalization, experienced management team, and the historical profitability of its U.S. subsidiaries. The specialty U.S. operations, which represent the core business of the Argo Group, are managed holistically as respects to capital, investment strategy and market presence. Argo Re, as the lead insurer, also assumes risk via a quota share reinsurance agreements with its U.S. subsidiaries. The ratings also reflect the favorable results to date of Argo Re’s growing book of unaffiliated, third-party reinsurance business comprised of short-tail coverages, mainly property catastrophe reinsurance, the rating agency says.
A.M. Best Co. downgraded the FSR to B- (Fair) from B (Fair) and ICR to “bb-“ from “bb” of Bankers Life Insurance Co. The outlook for both ratings has been revised to negative from stable.
The ratings reflect Bankers Life’s weak capital levels on both an absolute and risk-adjusted basis, according A.M. Best. The decline in its Best’s Capital Adequacy Ratio is due in part to the company’s increased exposure to below investment-grade bonds due to downgrades in prime and Alt-A residential mortgage-backed securities. This direct exposure is mitigated by the underlying credit enhancements and priority to cash flows.
IPC Holdings Ltd. and its subsidiaries
A.M. Best Co. commented that the FSR of A (Excellent) and ICR of “a” of IPCRe Ltd. and IPCRe Europe Ltd., which are reinsurance subsidiaries of IPC Holdings Ltd. (IPC), remain under review with negative implications, following the recent shareholder vote to terminate a merger agreement with Max Capital Group Ltd. A.M. Best also has maintained all debt ratings of IPC under review with negative implications.
The under-review status reflects the uncertainty with respect to IPC’s future ownership and to a lesser extent, the pending retirement of its long-standing CEO, Jim Bryce, for whom a long-term successor is being sought, A.M. Best says.
At this time, IPC is being actively pursued by an outside company whose intention is to acquire IPC with or without the approval of IPC’s management or Board of Directors. IPC shareholders have requisitioned IPC’s Board of Directors to hold a special shareholders’ meeting to vote on replacing the present Board of Directors. Concurrently, IPC’s Board of Directors and management continue to solicit potential bidders during this period.
Fitch Ratings affirmed Loews Corp.’s issuer default rating (IDR) at ‘A’ and debt ratings of Loews’ senior unsecured notes at 'A'. The Rating Outlook is Stable. Approximately $865 million of debt is affected by this rating action.
The affirmation reflects Loews' historically stable credit profile and Loews' robust balance sheet including significant cash balances and low debt levels at the parent company level, combined with the continued payment of sizable dividends by Loews subsidiaries. Fitch regards Loews' holding company structure as a significant benefit to lenders, as it protects bondholders from operating and legal risks at the subsidiary level while the large cash balances, significant current and projected future dividends, and the ability to liquidate holdings provide substantial protections and enable the company to comfortably meet all interest and principal obligations.
Fitch Ratings affirmed the 'A' insurer financial strength (IFS) rating of Pan-American Life Insurance Co. and its wholly owned subsidiary, Pan-American Assurance Co., collectively referred to as Pan-American. The rating outlook is stable.
This rating action follows Fitch's updated review of Pan-American's capitalization, liquidity, financial flexibility and operating performance.
Fitch continues to view Pan-American's balance sheet as very strong. The company has virtually no exposure to non-agency structured securities, and direct commercial mortgage exposure is less than 0.5% of invested assets. Total risky assets, which include below-investment grade bonds (BIGs), unaffiliated common stock, troubled real estate and Schedule BA assets, in relation to statutory capital is materially below average. BIGs increased in 2008 due primarily to fallen angels. About 25% of the company's BIGs are comprised of required investments in sovereign bonds as a condition of doing business in certain Latin American countries.
Western & Southern Financial Group Inc. and its subsidiaries
A.M. Best Co. downgraded the FSR to A+ (Superior) from A++ (Superior) and ICR to “aa” from “aa+” of Western & Southern Financial Group Inc.’s (WSFG) core life insurance subsidiaries. The subsidiaries include The Western and Southern Life Insurance Co. (WSLIC), Western-Southern Life Assurance Co., Columbus Life Insurance Co., Integrity Life Insurance Co., National Integrity Life Insurance Co. and The Lafayette Life Insurance Co.
Concurrently, A.M. Best has downgraded the ICR to “a” from “aa-” and the debt rating to “a” from “aa-“on $500 million 5.75% senior unsecured notes due 2033 of WSFG. The downgrading of the debt ratings reflects a revision to standard notching for the group in accordance with A.M. Best’s published debt rating methodology. The outlook for all ratings is stable.
The rating actions reflect WSFG’s recent decline in capitalization—both on a statutory and GAAP basis—from realized and unrealized investment losses, somewhat modest earnings and premium growth trends relative to its rating level and continued exposure to further investment losses.
A.M. Best Co. affirmed the FSR of B++ (Good) and ICR of “bbb+” of Western Life Assurance Co. The outlook for both ratings is stable.
The ratings reflect Western Life’s trend of increasing premium production, positive operating earnings, stable capitalization and low levels of credit risk on its balance sheet.
In recent years, Western Life has reported continued growth in its key product segments, with the core group accident and sickness the largest contributing segment by premium income and earnings. The steady stream of earnings has enhanced risk-adjusted capital over the last several years. The company’s ownership by Western Financial Group Inc. presents increased business opportunities, and elevated business production is expected from affiliated distribution going forward, according to the rating agency.
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