11 Insurers See Ratings Updates
Agencies review AIG after government sells off majority stake; Guardian Life, QBE, United Auto and several others also see updates.
Insurance Networking Ratings Corner, September 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:
S&P affirmed its 'A-' long-term counterparty credit rating on American International Group Inc. (AIG) and revised the outlook to negative from stable.
The rating affirmation reflects the company's diverse stream of earnings and cash flows from its global property/casualty (Chartis Group) and U.S. life insurance (SunAmerica Group) operations, improving operating results, and the large amount of liquid and noncore assets held by the holding company. These strengths offset the removal from the rating of the one-notch uplift for government support.
Fitch has taken several rating actions designed to remove the impact of government ownership from AIG's ratings, and reflect significant progress in deleveraging the organization, following the U.S. Department of Treasury's (UST) sale of about $18 billion of AIG common stock, that reduces government ownership of AIG from 53 percent to about 21.5 percent.
Fitch has upgraded the Issuer Default Rating (IDR) of AIG to 'BBB+', while AIG's unsecured senior debt is affirmed at 'BBB', creating standard notching between those two ratings. The notching was compressed during the period of government majority ownership.
A.M. Best has commented that the issuer credit rating of “bbb” of AIG is unchanged, following the announcement of the sale of $20.7 billion of AIG common stock by the UST. The outlook is stable.
As a result of this sale, UST ownership interest in AIG will decline to about 15.9 percent from 77 percent at the beginning of 2012, and 92 percent following the February 2011 restructuring of AIG’s capital. As such, the actions taken by the UST to dispose of a substantial portion of its remaining stake in AIG marks a significant step in AIG’s progress toward separation from ownership by the U.S. government.
Moody's has affirmed the ratings of AIG (senior unsecured debt at Baa1), following the announcement that AIG has agreed to repurchase about $5 billion of its common stock from the UST in connection with the Treasury's offering of $18 billion of AIG common stock ($20.7 billion including underwriters' over-allotment option). The rating outlook for AIG is stable.
The proposed transaction is the Treasury's fourth, offering of AIG shares in 2012. In each prior case, AIG repurchased a significant block of shares, and public investors purchased the remaining shares. Assuming completion of the proposed offering and a $5 billion repurchase by AIG, the Treasury's ownership stake in AIG would be reduced to about 22 percent (about 16 percent if the over-allotment option is exercised in full) from about 77 percent at the start of the year. AIG has repurchased a total of $8 billion of shares through the Treasury's prior offerings. The proposed transaction would raise this total to $13 billion.
A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit rating (ICR) of “a-” of Americo Financial Life and Annuity Insurance Co. (AFL). Concurrently, A.M. Best has affirmed the FSRs of B+ (Good) and ICRs of “bbb-” of AFL’s key life/health affiliates. The outlook for these ratings is stable. Additionally, A.M. Best has revised the outlook to positive from stable and affirmed the ICR of “bbb-” and senior debt rating of “bbb-” of AFL’s parent, Americo Life Inc. (Americo).
The revised outlook reflects AFL’s favorable operating performance in recent periods, which has resulted in a considerable increase in capital and surplus, and a strong risk-adjusted capital position. Additionally, Americo maintains a relatively conservative level of financial leverage, while its interest coverage remains more than adequate for its current ratings. A.M. Best also notes that the ratio of intangible assets to stockholder equity has declined noticeably in recent periods to about 42 percent, and that the company’s consolidated investment portfolio has performed well since the financial crisis and is in a net unrealized gain position of more than $460 million as of June 30, 2012.
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