15 Insurers Affected By Latest Ratings Actions
Insurance Networking News, November 9, 2009
A.M. Best, Fitch Ratings and Standard & Poor’s (S&P) released ratings updates. The following are some of the most recent:
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American Community Mutual Insurance Co.
A.M. Best Co. downgraded the financial strength rating (FSR) to C+ (marginal) from B (fair) and issuer credit rating (ICR) to “b-” from “bb” of American Community Mutual Insurance Co. The outlook for both ratings is negative.
The downgrades reflect an expected material net operating loss resulting from reserve strengthening, which will occur in third quarter 2009, with a corresponding decrease in surplus, the rating agency says. An anticipated reduction in the company’s deferred tax asset in third quarter 2009 is expected to further decrease surplus. In addition, two surplus notes represent a significant portion of total surplus.
Bahamas First General Insurance Co. Ltd.
A.M. Best Co. affirmed the FSR of A- (excellent) and issuer credit rating of “a-” of Bahamas First General Insurance Co. Ltd. (BFG). The outlook for both ratings is stable. BFG is the primary holding of its parent company, Bahamas First Holdings Ltd.
The ratings are based on BFG’s continued solid capitalization, favorable operating performance and established presence in the Bahamian market, according to A.M. Best. These factors are supported by the company’s conservative catastrophe program, underwriting controls, local market expertise and enhanced risk management.
A.M. Best Co., Fitch Ratings and S&P announced actions on Berkshire Hathaway Inc. (BRK) after news of its intention to acquire Burlington Northern Santa Fe for approximately $44 billion, in a cash and stock transaction.
A.M. Best placed the FSR and ICR of the domestic and international property/casualty and life/health subsidiaries of BRK under review with negative implications. A.M. Best also placed the FSRs of A++ (superior) and ICRs of “aaa” of National Indemnity Group and GEICO and their members under review with negative implications. In addition, A.M. Best has placed the FSRs of A++ (superior) and ICRs of “aa+” of General Re Group (Gen Re) and its members under review with negative implications.
Fitch Ratings placed the ratings of BRK and the ratings of its insurance subsidiaries on Rating Watch Negative. Fitch's decision to place BRK's ratings on Rating Watch Negative reflects the agency's concerns about the transaction's effect on its asset profile and capitalization. Fitch views the BNSF acquisition, along with BRK’s investments in utilities and energy and finance company subsidiaries, as increasingly shifting the company's asset profile toward concentrated investments in operating subsidiaries that use more financial leverage and often have greater sensitivity to general economic conditions than the company's long-held insurance and holding-company equity-oriented investments.
S&P placed its ratings on BRK and various affiliates on CreditWatch with negative implications. The rating agency says BRK will assume approximately $10 billion of BNSF debt, making it BRK's largest acquisition to date. BRK already owns nearly 23% of the stock of BNSF. The acquisition of the remaining shares will be financed with a combination of 60% cash and the remaining 40% through the issuance of new BRK shares. S&P expects that a significant part of the cash portion will come from BRK's core insurance operations, as has historically been the case in other transactions.
Connaught Insurance Co. Ltd.
A.M. Best Co. affirmed the FSR of B+ (good) and the ICR of “bbb-” of Connaught Insurance Co. Ltd., the captive insurance company of Thomas Greg and Sons Ltd. (TG&S), a printing and security specialist. The outlook for the ratings is stable.
The ratings reflect Connaught’s adequate level of risk-adjusted capitalization in addition to a historically good operating performance. Offsetting factors include a potentially volatile underwriting performance and a restricted business profile.
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