11 Insurers See Ratings Updates
Insurance Networking Ratings Corner, November 13, 2012
China Life has maintained a leading position in the Chinese life insurance market, with a share of 32.4 percent of total premiums in H112. It continues to focus on ensuring steady growth of new business value. New business value increased 2.5 percent year-on-year in H112, as resilient contribution from more profitable, regular-premium products mitigated a decline in single-premium policy sales amid tightened bank assurance regulations.
Fitch says Harbinger Group Inc.'s (HRG) 'B' Issuer Default Rating (IDR) is unaffected by HRG's recent announcement that it will establish an oil and gas joint venture with EXCO Resources (EXCO). HRG will acquire a 75 percent limited partnership interest and a 50 percent general partnership interest in the joint venture, while EXCO will acquire a 25 percent and 50 percent interest, respectively. Under the terms of the transaction HRG will provide $373 million in cash toward the purchase of properties for the joint venture.
Fitch views the transaction as in line with HRG's primary strategy to deploy its existing parent company cash and short-term investments to acquire and grow attractive businesses that generate sustainable free cash flow. The joint venture is expected to start distributing sustainable free cash flow to the partners shortly after the transaction is completed. HRG believes the transaction is expected to close in early-2013.
The initial effect on covenant tests, related to HRG's senior secured debt and preferred shares, is expected to be minimal.
S&P affirmed its 'BBB-' long-term counterparty credit rating on HealthSpring Inc., and then withdrew the rating. HealthSpring Inc., a Medicare-focused health plan, was acquired by Cigna Corp., a diversified health care services company, on Jan. 31, 2012. HealthSpring Inc. continues to exist as an intermediate holding company within the Cigna Corp. organization.
Prior to the rating withdrawal, S&P had a positive outlook on HealthSpring. This was based on S&P’s view that HealthSpring, which the ratings agency deems as a "strategically important" entity within the Cigna Corp. organization, was evolving toward "core" group status. Designation of core group status would have resulted in an upgrade.
A.M. Best has commented that the financial strength, issuer credit and debt ratings of Humana Inc. (Humana) and its insurance and health maintenance organization (HMO) subsidiaries remain unchanged. The outlook for all ratings is stable.
This comment follows the announcement that Humana has entered into a definitive agreement to acquire Metropolitan Health Networks (Metropolitan), a medical services organization that provides and coordinates medical care for about 87,500 Medicare Advantage, Medicaid and other beneficiaries, primarily in Florida, utilizing a primary care-centric business model. Metropolitan’s integrated care delivery systems include 35 state-of-the-art primary care medical centers and a robust network of affiliated physicians serving mainly Humana members. The transaction is valued at about $850 million, and Humana expects to finance the transaction with a combination of cash and debt.
The transaction provides Humana with business diversification as well as access to care for its members. Additionally, it may allow Humana to expand the Metropolitan model to other geographic regions.
A.M. Best has assigned a debt rating of “bbb” to $275 million of 4.6 percent senior unsecured notes, due November 2022, to be issued by OneBeacon U.S. Holdings Inc. (OBUS). The notes are issued with the unconditional guarantee of OBUS’ indirect parent, OneBeacon Insurance Group Ltd. (OBIG).
Proceeds from the offering will be used to redeem OBUS’ outstanding 5.875 percent senior notes, due May 2013. Financial leverage and coverage measures will remain within A.M. Best’s guidelines for the assigned rating.
The Oriental Insurance Co. Ltd.
A.M. Best has affirmed the financial strength rating of B++ (Good) and issuer credit rating of “bbb+” of The Oriental Insurance Co. Ltd. (Oriental). The outlook for both ratings is stable. The ratings reflect Oriental’s strong risk-adjusted capitalization and improving trend in its underwriting performance.
Oriental recorded a reported surplus of INR 99 billion as at March 31, 2012, which dropped by about 3% over the previous year’s INR 103 billion. Oriental’s risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), also slightly weakened in fiscal year 2011 to 2012, predominantly as a result of an increase in the company’s insurance premiums and insurance liabilities higher than the growth in reported surplus. During the near-to-medium term, A.M. Best expects that the growth of Oriental’s capital and surplus will be supported by the company’s improving underwriting performance and consistent investment income. A.M. Best believes that Oriental's capitalization is adequate for its current rating level.
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