On Friday, Standard & Poor's Ratings Services lowered its long-term sovereign credit rating on the United States of America to 'AA+' and assigned a negative outlook.

As a result, it lowered to 'AA+' from 'AAA' its long-term counterparty credit and financial strength ratings on the member companies of five U.S. insurance groups: Knights of Columbus, New York Life, Northwestern Mutual, Teachers Insurance & Annuity Assoc. of America (TIAA), and United Services Automobile Assoc. (USAA). The outlooks on the ratings on all of these companies are negative. S&P also said it lowered the ratings on approximately $17 billion of securities issued by New York Life, Northwestern Mutual, TIAA, USAA and their affiliates.

At the same time, S&P affirmed the 'AA+' ratings on the members of five other insurance groups—Assured Guaranty, Berkshire Hathaway, Guardian, Massachusetts Mutual, and Western & Southern—and revised the outlooks on ratings on these companies to negative from stable.

The rating actions on these 10 insurance groups follow the lowering of the long-term sovereign credit rating on the United States of America. The 10 affected insurance groups operate in the United States and generally have significant holdings of U.S. Treasury and agency securities. For the insurers with the most exposure, these investments constituted as much as 200% of total adjusted capital at year-end 2010, according to the agency. “We factor direct and indirect sovereign risks—such as the impacts of macroeconomic volatility, currency devaluation, asset impairments, and investment portfolio deterioration—into our financial strength ratings. Per our criteria, the sovereign local-currency credit rating constrains our financial strength ratings on insurers.”


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