16 Insurers See Ratings Updates
RGA, WellPoint and 14 others receive updates.
Ratings Corner, September 25, 2013
A.M. Best, Fitch Ratings, Moody’s Investors Service and Standard & Poor’s (S&P’s) released ratings updates. The following are some of the most recent:
Moody's has affirmed the Caa1 insurance financial strength rating (IFS) of Affirmative Insurance Co. (AIC), lead insurance operating subsidiary of Affirmative Insurance Holdings Inc. (Affirmative), following the announcement that Affirmative will sell its retail agency distribution business to Confie Seguros, a national insurance distribution company, for up to $120 million in cash, including $40 million contingent on risk-based capital levels at AIC.
Moody's changed the rating outlook for AIC's insurance financial strength rating to stable from negative, reflecting greater capital available to AIC as a result of the sale, the resolution of a deficiency with a loss reserve requirement under the Illinois Insurance Code, and improvement in underwriting results. The transaction is expected to close within the next 30 days.
The $120 million consideration is composed of $80 million in cash, and $40 million to be released to Affirmative dependent on AIC meeting risk-based capital (RBC) ratio levels over the next six to 24 months. Affirmative expects to pay down the $119 million outstanding balance under its senior credit facility with the $80 million in proceeds ($72 million after transaction expenses), together with a new financing arrangement.
A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating (ICR) of “a-” of AmerInst Insurance Co. Ltd.
Concurrently, A.M. Best has revised the outlook to negative from stable and affirmed the ICR of “bbb-” of AmerInst’s holding company, AmerInst Insurance Group Ltd. (AmerInst Insurance) The ICR for AmerInst Insurance is strictly based on its methodology.
The ratings reflect AmerInst’s strong capitalization, experienced management team and niche expertise in providing professional liability coverage. AmerInst’s long-term contractual relationship with Crum and Forster Insurance Co., its partner in underwriting, marketing and claims, also contributes positively to the ratings. Partially offsetting these positive rating factors are AmerInst's narrow spread of underwriting risk, as well as its inability to meet its new revised business plan, which was forecasted over the past three years.
Aspen Insurance Holdings Ltd. U.S. subsidiaries
A.M. Best has affirmed the financial strength rating of A (Excellent) and issuer credit ratings of “a” of Aspen Specialty Insurance Co. (ASIC) and Aspen American Insurance Co. (AAIC). Both companies are wholly owned subsidiaries of their ultimate parent, Aspen Insurance Holdings Ltd. (Aspen). The outlook for all ratings is stable.
These ratings are based upon ASIC and AAIC’s strategic importance and roles in Aspen’s U.S. business platform. In addition, the ratings also reflect the explicit support provided via the substantial quota share reinsurance of ASIC and AAIC’s net business through their affiliate, Aspen Bermuda Ltd. (ABL).
Moreover, ABL also provides a guarantee for all of ASIC and AAIC’s third-party reinsurance recoverables. Additionally, ASIC’s balance sheet is further protected by an adverse development cover for its outstanding loss reserves as of Dec. 31, 2008. The ratings also acknowledge the implied support of future parental commitment.
A.M. Best Asia-Pacific has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of Beneficial Insurance Ltd. (BIL). The outlook for both ratings is stable. The rating affirmations reflect BIL's adequate capitalization and the favorable growth of its core business.
On a risk-adjusted basis, BIL continues to demonstrate adequate capitalization to support its net required capital, as evaluated by Best's Capital Adequacy Ratio (BCAR). Although illiquid assets represent a high percentage of its total investments, underwriting leverage is conservative, and the operation has no major exposure to volatile lines. Hence, BIL's overall capitalization is deemed adequate to support its overall underwriting and asset risks.
Since fiscal year 2009, premium revenue and policies covered for BIL's pet insurance business have compounded by 39 percent and 30 percent, respectively. While overhead costs comprise 96% of total operating expenses, as the company continues to grow, the underwriting results are expected to benefit from a lower expense ratio.
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