11 Insurers See Ratings Updates
The Hartford, ING and 9 others receive updates.
Insurance Networking Ratings Corner, February 12, 2013
A.M. Best, Fitch Ratings, Standard & Poor’s (S&P’s) and Moody’s Investors Service released ratings updates. The following are some of the most recent:
S&P has affirmed its 'A-' long-term counterparty credit rating on Amerigroup Corp., and then withdrawn the rating at new owner, diversified health care services company Wellpoint Inc.'s, request.
S&P said Amerigroup Corp., a Medicaid -focused health plan, was acquired by WellPoint Inc. on Dec. 24, 2012. Wellpoint repaid Amerigroup's outstanding debt in late-January 2013. WellPoint now will have Amerigroup Corp. operate as wholly owned intermediate holding company.
Following Cigna's announcement of a reinsurance transaction involving its variable annuity exposure, Fitch has affirmed Cigna Corp.'s (Cigna) 'BBB+' Issuer Default Rating (IDR) and 'BBB' unsecured senior debt ratings. In addition, Fitch affirmed the Insurer Financial Strength (IFS) ratings of various Cigna subsidiaries at 'A'. The Rating Outlooks are Stable.
Overall, Fitch has a favorable view of this transaction, because it effectively eliminates a source of potential volatility from Cigna's earnings and capital. Partially offsetting this are Fitch's expectations that Cigna will record a loss of about $500 million, and a short-term modest increase in financial leverage related to the transaction.
Moody's has affirmed the Baa2 senior debt rating of Cigna and the A2 insurance financial strength (IFS) ratings of its operating subsidiaries with a stable outlook, following the announcement that it had entered into a definitive agreement with Berkshire Hathaway Life Insurance Co. of Nebraska (Berkshire Life) and National Indemnity Co. (Aa1 IFS), the parent of Berkshire Life (NICO).
Under the agreement, Berkshire Life will reinsure Cigna's run-off Guaranteed Minimum Death Benefits (VADBe) and Guaranteed Minimum Income Benefits (GMIB) businesses. The total reinsurance premium to be paid by Cigna is $2.2 billion, with one-third of the amount paid at the time of the announcement, and the balance to be paid during the period-ending April 30, 2013.
Moody's has affirmed the debt ratings of The Hartford Financial Services Group Inc. (senior debt Baa3), following the company's announcement that it intends to retire about $1 billion of debt and repurchase $500 million of shares. The company also announced that it received approval for a $1.2 billion extraordinary dividend from its Connecticut-based life insurance companies, and would receive about $300 million from dissolving its Vermont life reinsurance captive to fund the capital management plan.
Moody's also affirmed the insurance financial strength (IFS) ratings of the company's P&C insurance operating subsidiaries and two of the life insurance operating subsidiaries. Moody's downgraded the IFS rating of Hartford Life and Annuity (ILA) to Baa2 from A3 as this entity contains most of HIG's runoff Life business, including U.S. and international annuities (including variable annuity), and private placement life insurance. The outlook for all of the ratings is stable.
Moody's said it believes that The Hartford's capital plan balances the competing priorities of debt holders and equity holders in a way that will maintain strong financial flexibility, and support the organization's overall credit profile. The capital plan will result in a moderate positive impact on the company's financial leverage and interest coverage metrics.
Fitch expects to assign a 'BBB-' rating to ING U.S. Inc.'s (ING U.S.) $1 billion planned issuance of 2.9 percent senior notes, due 2018. The transaction is expected to close on Feb. 11, 2013.
The net proceeds of this offering will be used for general corporate purposes, including repayment of commercial paper and amounts owed under its term loan agreement. Pro forma financial leverage is expected to remain near 27 percent. On Jan. 7, 2013, Fitch affirmed all of its ratings for ING U.S. and its subsidiaries with a Stable Outlook.
The key rating triggers that could result in a downgrade include:
• Inability to complete an IPO as planned – this would include not being able to secure third-party financing to replace the $500 million of remaining intercompany debt and the $1.275 billion bank term loan
• A decline in reported risk-based capital (RBC) below 385 percent
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