Allianz, American Family and 15 Others Receive Ratings Updates
Several insurers negatively impacted by ongoing Eurozone sovereign debt crisis, including Allianz SE, Aviva, AXA and MAPFRE.
Insurance Networking Ratings Corner, December 20, 2011
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:
Allianz SE and its subsidiaries
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As a result of the continued negative developments regarding the eurozone sovereign debt crisis, A.M. Best Europe is taking rating actions on a number of European (re)insurers. Amongst them, A.M. Best has downgraded the issuer credit ratings (ICR) to “aa-” from “aa” and affirmed the financial strength rating (FSR) of A+ (Superior) of Allianz Societas Europaea and its main subsidiaries. All ratings have been placed under review with negative implications.
These rating actions were driven by Allianz SE’s exposure to investments in several peripheral eurozone economies, Italy in particular, as well as its investment exposures to eurozone banks.
A.M. Best’s rating actions on Allianz SE and other European (re)insurers reflect their exposure to the continued deterioration of the sovereign creditworthiness of several eurozone countries and the negative economic outlook for the region. A.M. Best has been monitoring actively this crisis and released reports on related (re)insurers’ exposure in September and November of this year. The rationale for taking rating action at this point is largely attributable to the current level of credit and liquidity risk for insurers operating within the eurozone countries – most notably Italy and Spain. The perceived strain on the economies of these countries and companies operating within their borders is growing rapidly with very little evidence of a solution being formulated to address near-term concerns.
American Capital Partners Re Ltd.
A.M. Best has assigned a financial strength rating of A- (Excellent) and an issuer credit rating of “a-” to American Capital Partners Re Ltd. (ACP Re). The outlook assigned to both ratings is stable.
These ratings reflect ACP Re’s solid, risk-adjusted capitalization, historical profitability in business assumed and experienced management team. The ratings also reflect ACP Re’s conservative business plan, which is driven by its assumption of 15% of Integon National Group’s (Integon) book of business (formerly GMAC’s personal lines books of business) and the operational benefits ACP Re derives by utilizing the infrastructure of Integon.
These positive rating factors are offset partially by the execution risk faced by management in achieving its business plan, and its limited business profile as a reinsurer of personal lines business for one client. In addition, ACP Re maintains elevated common stock leverage (market value of common stocks to shareholders’ equity) that is concentrated in a single, publicly traded issuer, which exposes ACP Re stockholders’ equity to the vagaries of the equity markets or changes in fundamentals at its single largest holding.
American Family Mutual Insurance Co.
Fitch has affirmed the 'A' Insurer Financial Strength (IFS) rating of the American Family Mutual Insurance Co. The rating outlook is stable.
The rating action primarily reflects American Family's strong market position and solid capitalization, typified by very low financial leverage and moderate operating leverage. Balanced against these strengths was poor operating performance as a result of record-high storm losses in 2011, reaching about $1.2 billion gross losses through nine months.
As of Sept. 30, 2011, American Family's policyholders' surplus decreased modestly by $163 million, or 3.6 percent, from year-end 2010 to $4.4 billion, primarily due to unrealized investment and catastrophe losses. Fitch notes that statutory capitalization remains above pre-financial crisis levels after significant surplus growth in 2010 and 2009.
Assurant Inc. and its subsidiaries
A.M. Best has affirmed the financial strength ratings (FSR) and issuer credit ratings (ICR) of the property/casualty and life/health insurance subsidiaries of Assurant Inc. Additionally, A.M. Best has affirmed the ICR of “bbb” and debt ratings of Assurant. The outlook for all ratings is stable.
Assurant’s ratings recognize the organization’s diverse business mix, established presence in numerous niche markets, strong operating results and solid overall capitalization. As of Sept. 30, 2011, Assurant’s unadjusted debt-to-capital and debt-to-tangible capital ratios were 16.2 percent and 19.3 percent, respectively, while maintaining a fixed-charge coverage ratio that is well supportive of the ratings. Assurant also maintains a $500 million commercial paper program, which is 70 percent secured by a back-up credit facility. The organization also has no debt maturing until 2014, and it maintains solid liquidity.
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