16 Insurers Receive Ratings Updates
The Phoenix Companies Inc. experiences setbacks after recent announcement; AIG, New York Life and several others also see updates.
Insurance Networking Ratings Corner, December 18, 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:
American International Group Inc.
A.M. Best has commented that the issuer credit rating of “bbb” of American International Group Inc. (AIG) is unchanged, following the announcement of the U.S. Treasury’s plan to sell its remaining holdings of AIG’s common equity and AIG’s agreement with an investor group to sell up to a 90% stake in its International Lease Finance Corp. (ILFC) subsidiary. In addition, the financial strength ratings (FSRs) and the issuer credit ratings (ICRs) of AIG’s property/casualty subsidiaries also are unchanged by those announcements, as well as the release of the anticipated loss from Superstorm Sandy. The outlook for all ratings also remains unchanged.
The sale of the majority interest in ILFC and the UST’s decision to sell its remaining common interest in AIG mark the completion of AIG’s plan to remove itself from U.S. Government ownership and refocus its operations on its core insurance business. A.M. Best’s assessment of AIG’s financial position has, in recent years, considered the potential calls on the holding company, related to the debt of ILFC.
Although this debt was secured by physical assets owned by ILFC and was without recourse to AIG, the reputational risk to AIG should timely payments not be made on that debt was considerable. With the sale of a majority position in ILFC, A.M. Best’s future assessment of AIG no longer will include a stressed scenario under which AIG would make payments on the ILFC debt.
American Memorial Life Insurance Co.
S&P revised its outlooks on American Memorial Life Insurance Co. (AMLIC) and American Bankers Life Assurance Co. of FL (ABLAC) to positive from stable. At the same time, we affirmed our 'A-' long-term counterparty credit ratings on both entities.
S&P said that, because it considers AMLIC and ABLAC to be core components of Assurant Solutions, which in turn is core to the Assurant group, the agency now considers AMLIC and ABLAC to be core to the group as well. AMLIC is the primary legal entity through which Assurant sells its pre-need insurance products in the United States, and the pre-need segment accounts for more than 30% of Assurant Solutions' earnings. Assurant sells life and health credit insurance through ABLAC, which is the primary entity for selling these products in Canada. Assurant is targeting both the pre-need and Canadian credit insurance markets for growth.
Besides Assurant Solutions, S&P considers the Assurant Specialty Property segment to be core to the group. Specialty Property is the most profitable unit within the company, with pretax net income of $460 million (65 percent of consolidated pretax net income) and return on revenues (ROR) of 22 percent for 2011, and has grown considerably in the last five years, mainly in its lender-placed homeowners' book as a result of record-setting placement rate on delinquent loans and foreclosures during the height of the financial crisis.
S&P assigned its 'BBB+/A-2' counterparty credit rating to Aon Plc. At the same time, the ratings agency assigned a 'BBB+' debt rating to AON's proposed senior debt issue. This is part of an offer whereby AON is exchanging a portion of its outstanding 8.205%, junior subordinated deferrable-interest debentures, due January 2027, into 30-year senior notes, due 2042. The new notes carry a guarantee form AON Corp.
S&P said the rating on AON reflects the company's strong competitive position, arising from its well-established global presence in the risk-solutions business, supplemented by its global human-resources solutions segment. The company enhanced its market position in consulting and outsourcing with its October 2010 acquisition of Hewitt Associates Inc. AON was the world's largest insurance broker in 2011, according to Business Insurance magazine, because of its organic growth and acquisitions. Other rating strengths include its appropriately managed leverage and cash flows, and credit metrics that are healthy for the rating and compare favorably with those of its global broker peers.
The new senior debt issue does not change the amount of AON's outstanding debt, its leverage, or its financial tolerance. In addition, issuing this bond helps AON reduce its refinancing risk, extends its maturity profile, and allows the company to take advantage of low interest rates.
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