10 Insurers See Ratings Updates
AIG, CNA and eight others receive updates.
Insurance Networking Ratings Corner, February 20, 2013
A.M. Best, Fitch Ratings, and Standard & Poor’s (S&P’s) and released ratings updates. The following are some of the most recent:
Fitch says the ratings of Aetna Inc. (AET) remain on Rating Watch Negative, pending the close of AET's previously announced acquisition of Coventry Health Care Inc. (CVH).
The rating actions follows completion of Fitch's review of interim events leading to the acquisition's expected mid-2013 close. Fitch had placed AET's ratings on Rating Watch Negative on Aug. 20, 2012, following the company's announcement that it had entered into a definitive agreement to acquire CVH in exchange for AET common shares and cash totaling $5.7 billion.
Since then CVH shareholders have voted to formally adopt the agreement governing the acquisition, AET has issued $2 billion of senior, unsecured securities to finance a portion of the acquisition, and AET has taken steps required to obtain necessary regulatory approvals. The Rating Watch Negative status continues to reflect Fitch's concerns about AET's post-close financial leverage and the integration risks associated with the transaction. Fitch views the transaction as materially larger and operationally more complex than acquisitions completed by AET in recent years, and notes that it is partially debt-financed.
American International Group Inc.
Fitch has upgraded the Insurer Financial Strength (IFS) ratings of American International Group Inc.'s (AIG) U.S. life insurance subsidiaries led by AGC Life Insurance Co. to 'A+' from 'A'. Fitch also has affirmed the 'A' IFS ratings of AIG's rated property/casualty insurance subsidiaries, as well as AIG's Issuer Default Rating (IDR) of 'BBB+' and senior debt rating of 'BBB'. The Rating Outlook is Stable.
The upgrade of the life insurance subsidiaries is driven by continued improvement in AIG's Life & Retirement subsidiaries statutory capital position, recovery of investment values over time and return to stronger operating profits and earnings stability. Fitch believes the company has largely recovered from the effects of the financial crisis and is capable of consistently generating about $4 billion of annual run-rate operating earnings. Surrender activity has stabilized and is currently at or below historical levels, and is now reflective of the low-interest-rate environment, rather than AIG-specific issues.
Net investment spreads have improved as a result of an increase in base yields, due to the reinvestment of cash and short-term investments in 2011 combined with lower interest credited. These positive factors are offset, somewhat, by concerns as to the effect of continued very low interest rates on product performance and future profitability.
Cigna Corp. and its subsidiaries
A.M. Best has affirmed the issuer credit rating (ICR) of "bbb" and debt ratings of Cigna Corp. (Cigna). Concurrently, A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and ICRs of “a” of the key life/health subsidiaries of Cigna, as well as its medical health maintenance organizations (HMO) and dental HMO subsidiaries. Additionally, A.M. Best has assigned an FSR of A- (Excellent) and ICRs of “a-” to the HealthSpring subsidiaries that were acquired by Cigna in January 2012.
A.M. Best also has affirmed the FSR of A- (Excellent) and ICRs of “a-” of three of the Cigna supplemental benefit companies, and upgraded the FSR to A- (Excellent) from B++ (Good) and ICR to “a-” from “bbb” of American Retirement Life Insurance Co. (American Retirement Life). The outlook for all the above ratings is stable.
In addition, A.M. Best has withdrawn the FSR of A (Excellent) and ICR of “a” of Cigna Arbor Life Insurance Co. (Cigna Arbor). Cigna Arbor’s role as reinsurer of Connecticut General Life Insurance Co.’s (CGLIC) run off Guaranteed Minimum Death Benefit and Guaranteed Minimum Income Benefit business will be discontinued following CGLIC’s agreement to reinsure the run-off business to Berkshire Hathaway Life Insurance Co. of Nebraska.
Fitch has affirmed the ratings on CNA Financial Corp. (CNA) including the following:
• Issuer Default Rating (IDR) at 'BBB'
• Senior debt at 'BBB-'.
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