17 Insurers See Ratings Updates
Insurance Networking Ratings Corner, November 20, 2012
While Markel continues to benefit from its long-standing reputation among U.S. wholesalers and retailers, Markel's recent underwriting performance continues to be adversely affected by prevailing soft market conditions as well as increased expenses. Markel has long maintained underwriting leverage higher than the average of the surplus lines composite.
OneBeacon Insurance Group Ltd. subsidiaries
Fitch has assigned an 'A' Insurer Financial Strength (IFS) rating to OneBeacon Insurance Group Ltd.'s (OneBeacon; 75 percent ownership by White Mountains) new operating company insurance subsidiaries, OBI National Insurance Co. (OBIN) and Homeland Insurance Co. of Delaware (HODE). The Rating Outlook is Stable. All other ratings of OneBeacon and its subsidiaries are not affected by this action.
Fitch's rating action reflects the assignment of OneBeacon's group IFS rating to OBIN and HODE as core insurance affiliates. These recently established insurance entities were formed to write OneBeacon's ongoing business and will cede 100% to Atlantic Specialty Insurance Co., the group's primary ongoing insurance entity, through a quota share reinsurance agreement. This restructuring of business entities is being completed as part of the expected sale of OneBeacon's runoff business companies to Armour Group Holdings Ltd. (Armour).
Fitch has assigned an 'A-' rating to Principal Financial Group Inc.'s (PFG) proposed issuance of about $800 million of senior, unsecured notes. PFG's long-term Issuer Default Rating is unaffected by this rating action.
Fitch placed the ratings of PFG and its insurance operating subsidiaries on Rating Watch Negative on Oct. 9, 2012, following the company's announcement that it would acquire AFP Cuprum S.A. (Cuprum), a Chilean pension manager, for consideration of about $1.5 billion. The Rating Watch reflects Fitch's view that financing of the transaction will bring PFG's financial leverage and coverage to levels near previously articulated downgrade triggers. The notes being rated are being issued to fund this acquisition.
The notes are guaranteed by PFG's intermediate holding company, Principal Financial Services Inc., of which the organization's primary operating companies are wholly owned subsidiaries. This includes Principal Life Insurance Co., PFG's largest insurance operating subsidiary and the source of the vast majority of the overall organization's operating cash flow.
A.M. Best has assigned a debt rating of “bbb” to the recently issued $1.5 billion, 5.625% fixed-to-floating rate junior subordinated notes, maturing June 15, 2043, of Prudential Financial Inc. (PFI). The assigned outlook is stable. The financial strength, issuer credit and existing debt ratings of PFI and its domestic life/health insurance companies are unchanged.
The assigned rating reflects the notes’ deeply subordinated status within PFI’s capital structure. Specifically, these securities will rank junior to PFI’s existing and future senior indebtedness and pari passu with PFI’s existing junior subordinated notes.
A.M. Best notes that the newly issued, junior subordinated notes mirror the key terms of the company’s most recent issuance. Similarly, these notes differ from the other existing junior subordinated debt, in that PFI may redeem the new notes on or after June 15, 2023, or at any time within 90 days after the occurrence of a “tax event,” a “rating agency event” or a “regulatory capital event.” The net proceeds of the hybrid offering are expected to be used for general corporate purposes, including the redemption of PFI’s outstanding retail medium-term notes.
S&P revised its outlook on global multiline insurer QBE Insurance Group Ltd. (rated 'A'), the group's core operating entities (rated 'A+'), and the group's other rated subsidiaries (rated 'A') to negative from stable. All ratings have been affirmed.
The revision of the outlooks reflects S&P’s expectation that, based on QBE group's market update information, the group's capital position will continue to be deficient at the 'A' category at the end of 2012. This deficiency is below the ratings agency’s expectations of a return to redundancy at the 'A' level, based on S&P's risk based-capital model, which the agency articulated in its July 2012 outlook statement.
A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a+” of the pooled and reinsured members of QBE North America Insurance Group (QBENA Group). These companies are key operating subsidiaries of QBE Insurance Group Ltd. (QBE), the non-operating holding company of the QBE group of companies. The outlook for all ICRs has been revised to negative from stable. The outlook for all FSRs remains stable.
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