14 Insurers See Ratings Updates
CNA, ING and 12 others receive updates.
Insurance Networking Ratings Corner, January 15, 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:
American International Group Inc. subsidiaries
S&P withdrew its counterparty credit and financial strength ratings on certain U.S. life insurance subsidiaries of American International Group Inc. (AIG), including SunAmerica Annuity and Life Assurance Co., SunAmerica Life Insurance Co., Western National Life Insurance Co., American General Life & Accident Insurance Co., and American General Life Insurance Co. of Delaware.
Effective Dec. 31, 2012, these companies merged with and into American General Life Insurance Co. (AGLIC; A+/Stable/--), AIG's lead U.S. life insurance company. As a result of the mergers, the policies of these companies have become obligations of AGLIC.
A.M. Best has upgraded the financial strength rating to A (Excellent) from B (Fair) and the issuer credit rating to “a+” from “bb+” of Austin Mutual Insurance Co. (Austin). The outlook for both ratings has been revised to stable from positive.
The upgrades are due to the increase in Austin’s intercompany quota share reinsurance agreement from 35 percent to 100 percent as of Jan. 1, 2013, with the lead company of Main Street America Group, NGM Insurance Co., having become a fully reinsured member.
A.M. Best does not expect to downgrade (or place a negative outlook on) the ratings of Austin in the near- to mid-term. However, such actions would ensue if the company’s relationship with the Main Street America Group, (most specifically, its intercompany reinsurance arrangements) were to incur material changes or have a severe reduction in Austin’s capitalization, due to an increased credit leverage of its reinsured book of business in the event of a catastrophe.
Cathay Financial Holdings Co. Ltd. and its subsidiaries
Moody's has downgraded to Baa3 from Baa2 the issuer rating of Cathay Financial Holdings Co. Ltd. (Cathay Financial). In addition, Moody's has downgraded to Baa2 from Baa1 the insurance financial strength (IFS) rating of Cathay Life Insurance Co. Ltd. (Cathay Life), and downgraded to A3 from A2, the IFS rating of Cathay Century Insurance Co. Ltd. (Cathay Century).
The outlook on all these ratings is stable. The ratings and outlook of Cathay United Bank are not affected in this rating action. Moody’s said the downgrade of Cathay Life's IFS rating reflects its persistently weak financial profile, as measured by the ratios of profitability and capital adequacy.
Cathay Life's profitability remains low, and its net earnings have been volatile during recent years. In addition, a negative spread issue remains, which is not anticipated to be resolved in the near term. The company's overall profitability will continue to be challenged under the prolonged low-interest-rate environment.
CNA Financial Corp. and its subsidiaries
A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of the property/casualty subsidiaries of CNA Financial Corp. (CNAF), also known as CNA Insurance Co.s (CNA). Concurrently, A.M. Best has affirmed the ICR of “bbb” and all debt ratings of CNAF and CNA Financial Capital I, II and III. A.M. Best also has affirmed the FSR of A- (Excellent) and ICR of “a-” of CNAF’s life/health subsidiary, Continental Assurance Co. (CAC). The outlook for all ratings is stable.
The rating actions reflect CNA’s excellent level of risk-adjusted capitalization, consistent and profitable operating performance and established position as a leading writer within the commercial lines segment of the U.S. property/casualty industry. In addition, the ratings recognize initiatives undertaken by CNA’s management to improve underwriting performance; its vastly improved technological infrastructure, which has enhanced data collection and segment reporting tools; and its continued focus on enterprise risk management.
Moreover, in 2010, CNA transferred about $1.6 billion of the group’s net legacy asbestos and environmental (A&E) liabilities to National Indemnity Co. A.M. Best views positively the long-term benefits CNA will derive from the substantial reduction in the uncertainty of its legacy A&E liabilities and potential A&E earnings drag.
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