Ratings Changes Affect 10 Insurers
Insurance Networking News, June 23, 2009
A.M. Best Co., Fitch Ratings, Standard & Poor’s, and Moody’s Investors Service released ratings updates. The following are some of the most recent:
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A.M. Best removed from under review with negative implications and affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit rating of “a-” of BancInsure Inc. Both ratings have been assigned a stable outlook.
The ratings were placed under review with negative implications on March 20, 2009 following BancInsure’s net loss for 2008 and unrealized investment losses, which, combined, produced a $16.1 million or 36% erosion in shareholders’ equity in 2008.
BancInsure’s ratings reflect that its risk-based capital position has been replenished by a significant capital contribution; thus, recognizing the financial strength and support of its investors, according to A.M. Best. Through April 30, 2009, BancInsure results demonstrate improvements in underwriting performance, and in its investment portfolio while showing a reduction in the company’s allocation to equities.
Fairfax Financial Holdings Ltd. and its Subsidiaries
A.M. Best affirmed the ICR of "bbb" and the unsecured debt ratings of Fairfax Financial Holdings Ltd. A.M. Best also affirmed the FSR of A (Excellent) and ICRs of “a” of Crum & Forster Insurance Group and Seneca Insurance Group, both wholly owned subsidiaries of Fairfax. Additionally, A.M. Best affirmed the ICR of “bbb” and the unsecured debt ratings of Crum & Forster Holdings Corp.
Concurrently, A.M. Best affirmed the FSR of B+ (Good) and ICR of “bbb-” and the FSR of B++ (Good) and ICR of “bbb” of TIG Insurance Group and Fairmont Specialty Group (both of Texas), respectively, which are both in run off. The outlook for all ratings is stable.
The ratings of Crum & Forster reflect its role within Fairfax, its strong risk-adjusted capital levels, proven opportunistic underwriting strategy (particularly in underserved markets) and management’s commitment to reduce the group’s property catastrophe exposure to improve overall profitability, according to A.M. Best. Significantly reduced legacy issues, including the commutation of most finite reinsurance contracts and the resolution in 2008 of its largest outstanding asbestos claim, also lends to the group’s profitability prospects going forward.
Investors Heritage Life Insurance Co.
A.M. Best affirmed the FSR of B+ (Good) and ICR of “bbb-” of Investors Heritage Life Insurance Co. Additionally, A.M. Best affirmed the ICR of “bb-” of its holding company, Investors Heritage Capital Corp. The outlook for all ratings is stable.
The ratings reflect Investors Heritage Life’s adequate level of risk-adjusted capitalization and historically stable operating profitability. At year-end 2008, risk-adjusted capitalization declined due to a loss of absolute capital and surplus. This loss in capital and surplus was driven by the net loss in realized capital losses, which is attributable to other-than-temporary impairments in the investment portfolio. However, net operating earnings have remained positive over the last five years.
A.M. Best assigned a debt rating of “a-” to Lincoln National Corp.’s recent issuance of $500 million 8.75% 10-year senior unsecured notes. The outlook for the rating is negative. The existing financial strength, issuer credit and debt ratings of Lincoln and its life/health insurance subsidiaries are unchanged.
The issuance of these notes is part of Lincoln’s recent capital-raising initiative, which included a $600 million common share offering as well as the company’s intention to issue approximately $950 million of preferred stock pursuant to the U.S. Treasury’s Capital Purchase Program. A.M. Best expects about $1 billion of the debt and equity proceeds to be downstreamed to Lincoln’s life/health insurance subsidiaries, with the remainder to be retained at the holding company for financial flexibility.
National Financial Group, its Members and National Life Insurance Co.
A.M. Best downgraded the FSR to B++ (Good) from A- (Excellent) and ICR to “bbb” from “a-”of National Financial Group (NFG) and its members. The group consists of National Insurance Co. and National Group Insurance Co. Concurrently, A.M. Best has downgraded the FSR to B++ (Good) from A- (Excellent) and ICR to “bbb+” from “a-” of National Life Insurance Co. The outlook for all ratings is negative.
These rating actions for NFG’s are the result of its continued poor operating performance, surplus erosion and geographic concentration of risk. While management has taken several initiatives to protect policyholders and its capital position, including a capital infusion, enhanced data management and the development of a solid reinsurance program, the group has failed to achieve expected underwriting results in recent years, with a continued weak performance projected for 2009.
New York Life Insurance Co.
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