9 Insurers See Ratings Updates
Insurance Networking Ratings Corner, January 2, 2013
Aviva Plc. subsidiaries
S&P affirmed its 'A-' ratings on Aviva Plc.'s U.S. insurance subsidiaries (Aviva Life and Annuity Co. and Aviva Life & Annuity Co. of New York; collectively referred to as Aviva USA). All of the ratings remain on Credit Watch Developing, where they were placed on Nov. 12, 2012. The ratings and outlooks on Aviva Plc. and its other rated subsidiaries remain unchanged following this announcement.
On Dec. 21, 2012, Aviva Plc. announced its plan to sell Aviva USA to Athene Holding Ltd. (Athene; not rated) for $1.55 billion. The continuation of the CreditWatch Developing placement reflects the level of uncertainty, regarding how Aviva USA's credit profile could change as it is sold and transitioned to its new owner. Subject to regulatory approval, this transaction is expected to close by mid-year 2013. Aviva will retain the North American asset management activities of Aviva Investors that are focused on third parties, as well as Aviva Plc. assets outside of the United States.
Athene is a life insurance holding company focused principally on the retirement market. Its business, through its subsidiaries, is focused primarily on issuing and reinsuring fixed annuities, including fixed-indexed annuities.
S&P revised the rating outlook on China Life Insurance Co. Ltd. to negative from stable. At the same time, S&P affirmed the 'AA-' long-term local currency counterparty credit rating and insurer financial strength rating on the company. The ratings agency also affirmed the 'cnAAA' long-term Greater China regional scale rating on the China-based life insurer.
S&P said it revised the rating outlook to reflect the view that China Life's capitalization may come under further strain during the next two years, following weakened operating performances in 2011 and 2012. The company's capitalization has deteriorated in recent years, due to its continued growth, volatility in the investment markets, and regulatory changes for bancassurance channels. S&P is uncertain about when China Life's operating performance can recover, given potential volatility in the domestic capital markets.
S&P could lower the ratings on China Life if the company's capitalization deteriorates to a level that is no longer commensurate with its stand-alone credit profile of 'a'. Such deterioration could materialize if the company's operating performance continues to weaken during the next two years. The agency also could lower the rating, if it believes the likelihood of extraordinary government support has reduced, which it views as a remote scenario.
OneBeacon Insurance Group Ltd. subsidiaries
Moody's has assigned A2 insurance financial strength (IFS) ratings to OBI National Insurance Co. (OBIN) and Homeland Insurance Co. of Delaware (HODE). OBIN and HODE are affiliates of OneBeacon Insurance Group Ltd. (OneBeacon). The outlook on the ratings is stable. OneBeacon's operating subsidiaries are wholly-owned by OneBeacon U.S. Holdings Inc. (OneBeacon U.S. - senior unsecured Baa2; stable outlook) which, in turn, is wholly-owned by OneBeacon. OneBeacon is an indirect, 75 percent-owned subsidiary of White Mountains Insurance Group Ltd. (White Mountains), with the remaining 25 percent publicly owned.
According to Moody's, OneBeacon's ratings reflect the company's strong underwriting capabilities and good profitability in several low-to-moderate hazard, niche specialty P&C segments, strong producer relationships, and good capitalization. Factors offsetting these strengths include meaningful, though significantly reduced, financial leverage, the company's track record as an active manager of capital, and execution risk associated with entry into new specialty segments.
OBIN and HODE are licensed to write specialty business commencing Oct. 1, 2012, and are wholly owned subsidiaries within the OneBeacon Group that cede 100 percent of their loss reserves and premiums to OneBeacon's lead specialty lines insurer, Atlantic Specialty Insurance Co. (ASIC, A2 IFS) via quota share reinsurance agreement. The ratings are tied directly to OneBeacon's ongoing specialty business led by ASIC.
Peak Reinsurance Co. Ltd.
A.M. Best has assigned a financial strength rating of A- (Excellent) and issuer credit rating of "a-" to Peak Reinsurance Co. Ltd. (Peak Re). The outlook assigned to both ratings is stable.
Peak Re is licensed in Hong Kong as a general reinsurer, with a focus on the Asia Pacific region. With initial capital of $550 million, the company is 85.1 percent owned by Fosun International Ltd. (Fosun) and 14.9 percent owned by International Financial Corp. Fosun is a Hong Kong-listed conglomerate with operations and investments in pharmaceuticals and healthcare, property, steel, mining, retail, services and insurance businesses in Mainland China.
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