8 Insurers See Ratings Changes
Moody’s and S&P react to Marsh McLennan’s Mercer subsidiary settlement, and to Lincoln National’s capital plan related to its TARP repayment.
Insurance Networking News, June 16, 2010
A.M. Best, Moody’s Investors Service and Standard & Poor's announced ratings updates. The following are some of the most recent:
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AXA Insurance U.K. and AXA Sun Life
S&P placed its 'AA-' long-term counterparty credit and insurer financial strength (IFS) ratings on AXA Insurance U.K. PLC (AXA Insurance U.K.), a subsidiary of France-based insurer AXA group (AXA), on CreditWatch with negative implications. The CreditWatch placement reflects the rating agency’s view of the announced partial disposal of the U.K. life portfolio and its potential implications for AXA's overall presence in the U.K.
S&P bases the 'AA-' rating on AXA Insurance U.K. on its assessment of this subsidiary as a core operating entity within AXA. The rating agency lowered its long-term counterparty credit and insurer financial strength ratings to 'A+' from 'AA-' on U.K.-based AXA Sun Life PLC (AXA Sun Life) a subsidiary of AXA. The outlook is stable.
While the rating agency says it understands that the property/casualty operations under AXA Insurance U.K. would not be affected by the planned partial disposal, the partial disposal of the life portfolio would put further strain on AXA Insurance U.K.'s P&C business and financial profile and its contribution to group earnings and geographic reach.
A.M. Best upgraded the financial strength rating (FSR) to A (excellent) from A- (excellent) and the issuer credit rating (ICR) to “a” from “a-” of Central Reinsurance Corp. (Central Re). The outlook for both ratings is stable.
The rating actions reflect Central Re’s rapid restoration of its capital level, continuous improvement in risk management and stable operating performance, A.M. Best says. The ratings also factor the company’s ability to execute its overseas expansion plan and the improvement in the underwriting results of its overseas portfolio.
Farmers’ Mutual Group and FMG Insurance Ltd.
A.M. Best upgraded the FSR to A (excellent) from A- (excellent) and the ICR to “a” from “a-” of Farmers’ Mutual Group (FMG) and its subsidiary, FMG Insurance Limited (FMGIL). The outlook for all ratings has been revised to stable from positive.
The ratings of both FMG and FMGIL reflect the group’s improvement in operating profitability and its strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), A.M. Best says. The ratings also acknowledge the shift in strategic focus by management over the past three years, which drove the improvement in the underwriting margin.
Moody and S&P took action on Lincoln National Corp. (LNC).
Moody’s assigned Baa2 (stable outlook) debt ratings to LNC’s $750 million issuance of fixed rate senior unsecured notes ($250 million maturing in 2015 and $500 million maturing in 2040). The notes are a drawdown from a shelf registration filed in March 2009.
S&P affirmed its 'A-' counterparty credit rating on Lincoln National Corp. and its 'AA-' counterparty credit and FSRs on LNC's insurance operations. S&P also raised its rating on Lincoln National Capital VI and the preliminary rating on LNC's preferred stock to 'BBB' from 'BBB-'. The outlook on all these companies remains stable.
LNC has announced a capital plan related to its repayment of $950 million in TARP CPP proceeds that the company obtained last year. LNC will use a mix of equity, debt, and cash for the repayment, including $335 million in common equity, $250 million in aforementioned senior notes, and $365 million in excess cash, mostly from the proceeds of recent asset sales.
S&P views the funding mix favorably, saying it will improve LNC's financial leverage and fixed-charge coverage while preserving sufficient excess cash that LNC could use to support the capital needs of its insurance operations if needed.
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