14 Insurers See Ratings Updates
Allied World, Lincoln National and 12 others receive updates.
Insurance Networking Ratings Corner, October 30, 2012
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:
Allied World Assurance Co. Holdings AG subsidiaries
Moody's has affirmed the debt and insurance financial strength ratings of Allied World Assurance Co. Holdings AG's (AWH) subsidiaries. In the same action, Moody's has assigned provisional ratings to the shelf registration of AWH and Allied World Assurance Co. Holdings Ltd. All ratings carry a stable outlook.
According to Moody's, its A2 insurance financial strength rating for Allied World Assurance Co. Ltd. and other operating subsidiaries is based on their track record of strong and stable operating returns, comfortable capital adequacy, good product and geographic diversification and manageable exposure to natural catastrophes, which likely would lessen the need to raise capital after a major catastrophe.
Moody’s said that, relative to reinsurers, Allied World consistently has achieved less volatile returns on capital that rank in the top quintile. Moody's also believes the company has comfortable capital adequacy, as underwriting and catastrophe leverage remain moderate. However, financial leverage is generally higher than most peers (c.21 percent at June 2012, including operating lease commitments). Moreover, reserve adequacy is a key pressure point, because the company focuses on long-tail casualty insurance. Moody's believes reported reserves are reasonable, but that reserve releases—which have been a significant contributor to earnings—will likely diminish in the future.
American Health and Life Insurance Co.
A.M. Best has affirmed the financial strength ratings (FSR) of A- (Excellent) and issuer credit ratings (ICR) “a-” of American Health and Life Insurance Co. (AHLIC) and Sears Life Insurance Co. Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICR of “a” of Triton Insurance Co. (Triton). The outlook for all ratings is stable. These companies ultimately are owned by Citigroup Inc.
AHLIC’s ratings reflect its stabilizing premium trends, along with its continued exposure to downturns in the financial products marketplace, as well as A.M. Best’s view that the company has a reduced strategic value to its ultimate parent. Despite a one-time 2010 net premium increase, resulting from a reinsurance transaction with a former affiliated company, National Benefit Life Insurance Co., A.M. Best notes that AHLIC’s top-line premium growth has improved only marginally during the last year.
This modest improvement in premium growth is due to improving loan volumes from OneMain Financial and CitiFinancial Canada, Citigroup Inc.’s consumer finance business. Moreover, AHLIC’s capital and surplus funds have declined during the last year as a result of extraordinary dividend payments to Citigroup Inc. AHLIC is included in Citi Holdings, which are businesses and portfolios of assets that Citigroup Inc. has determined are not central to its core business.
Moody's is maintaining the review for upgrade of the Ba2 senior debt rating and Ba2 corporate family rating of AMERIGROUP Corp., pending regulatory approval of its merger with WellPoint Inc. (IFS at A2, stable). The Baa2 insurance financial strength (IFS) ratings of AMERIGROUP Corp.'s operating subsidiaries also remain under review for upgrade.
On July 9, 2012, WellPoint announced it would acquire AMERIGROUP in a deal valued at $4.9 billion. The transaction, subject to regulatory approval, is expected to close in the Q4 2012.
At the close of the transaction, Moody's anticipates that WellPoint will assume and guarantee AMERIGROUP's 7.5 percent senior notes, due in 2019. The rating agency stated that the continuing review will focus on the completion of the transaction and WellPoint's level of support for the operating subsidiaries, and debt being acquired from AMERIGROUP, as well as its integration plans for the business. With projected annual revenues of about $8.8 billion, primarily in the Medicaid segment, AMERIGROUP provides added diversity to WellPoint's premium and earnings stream. Upon the close of the transaction, Moody's expects that AMERIGROUP's IFS and debt rating will be aligned with the higher rating of WellPoint's operating and holding companies.
S&P affirmed its 'BBB+' long-term counterparty credit and insurer financial strength ratings on AXA Insurance Ltd. (AXA Ireland). The outlook was negative. S&P subsequently withdrew the assessment at the issuer's request.
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