Allianz, Principal and 10 Others See Ratings Updates
UnitedHealth upgraded by multiple agencies after overseas venture; Amerigroup, Marsh & McLennan and several others receive updates.
Insurance Networking Ratings Corner, October 16, 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 raised its ratings on Allianz Worldwide Care Ltd. (AWC) to 'A+' from 'A'. The outlook is stable. The upgrade reflects AWC's sound track record of strong and stable underwriting and operating performance. Its five-year average net combined ratio is 96.2 percent (2007-2011), and the volatility level inherent in the ratio is less than 1 percent. (Lower combined ratios indicate better profitability. A combined ratio of more than 100 percent signifies an underwriting loss.)
In addition, AWC has an average return on equity of 21 percent and return on revenue of 5 percent, and has reported a net profit in each year during the last five years, even as the company doubled in size in terms of gross premium income (€302 million in 2011, up from €136 million in 2007). Furthermore, AWC restructured its investment portfolio to underpin its strong underwriting performance with stable investment income and protect its capital base, which S&P regard as positive.
Based on S&P’s base-case scenario, the agency expects that AWC will sustain its strong operating performance and continue to report combined ratios of around 96 percent, while increasing its premium income by 10 percent to 20 percent in 2012 through 2014. S&P also anticipates that the company will maintain its conservative investment profile and average credit quality of the portfolio at least within the 'A' range.
S&P’s 'BB+' long-term counterparty credit rating on Amerigroup Corp. (AGP) remains on CreditWatch with positive implications, where it initially was placed July 9, 2012, following WellPoint Inc.'s announcement that it has entered into an agreement to acquire Amerigroup.
S&P said the CreditWatch placement reflects Amerigroup's anticipated acquisition by a higher-rated entity (WellPoint), which, likely, will result in an upgrade by up to four notches. The company expects the acquisition to close by year-end 2012.
S&P will continue to monitor Amerigroup's operating performance and financial condition, as well as discuss its capital structure and role within the acquiring firm with WellPoint's management. The ratings agency expects Amerigroup's operating health plans to operate as wholly owned subsidiaries of WellPoint. S&P expects to raise its rating on Amerigroup by up to four notches to be consistent with the 'A-/Stable/A-2' counterparty credit rating on WellPoint.
S&P has lowered its counterparty credit rating on Genworth Financial Inc. (GNW) to 'BBB-/A-3' from 'BBB/A-2'. At the same time, S&P lowered the insurer financial strength rating and counterparty credit rating on Genworth Life Insurance Co. (GLIC) and core U.S. life operations to 'A-/A-2' from 'A/A-1'. The ratings agency also downgraded Genworth Financial Mortgage Insurance Ltd. to 'BBB-', because it relies on a holding-company guarantee.
S&P said it continues to view GNW as investment grade, due to its increased liquidity at the holding company, significant improvement in its U.S. mortgage insurance platform year to date, the Australian mortgage insurer's return to profitability in the second quarter, and the positive momentum in unassigned surplus at the U.S. life operations. However, S&P is lowering the counterparty credit rating by one notch to reflect the low earnings level for the organization (below expectations for the 'BBB' category) and the difficulty it will face expanding margins globally in the weak economy.
GNW let its two five-year credit facilities expire this year, and although S&P doesn’t think a full renewal was necessary, given a shift in its mix of businesses, the move highlights a straining of its financial flexibility in the capital markets.
A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit rating (ICR) of “a” of Greenlight Reinsurance Ltd. (Greenlight Re). A.M. Best also has affirmed the FSR of A- (Excellent) and ICR of “a-” of Greenlight Re’s affiliate, Greenlight Reinsurance Ireland Ltd.
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