Aflac, Allianz and 14 Others See Ratings Updates
AXIS, Berkshire Hathaway Life Insurance and UnitedHealth Group among others to receive updates.
Insurance Networking Ratings Corner, September 25, 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:
AEGON N.V. and its subsidiaries
Fitch has affirmed AEGON N.V.'s Long-term Issuer Default Rating (IDR) at 'A' and senior unsecured debt at 'A-'. Fitch also has affirmed the Insurer Financial Strength (IFS) ratings of AEGON's primary North American life insurance subsidiaries (AEGON Americas) at 'AA-'. The outlooks on AEGON's long-term IDR and the IFS ratings of its primary North American life insurance subsidiaries have been revised to negative from stable.
The affirmations reflect AEGON's continued capital strength and its stable, but high, financial leverage. AEGON's ratings continue to reflect the diversification of its products and distribution, particularly in U.S. retail markets, its measured risk appetite and its focus on cost control.
The Outlook revision reflects that AEGON's financial leverage as calculated by Fitch (32 percent at June 30, 2012) and fixed-charge cover (below 4x in 2011) remain materially outside stated guidelines for the rating level. The ratings are likely to be downgraded if financial leverage does not improve to below 30 percent, and fixed-charge cover to above 5x.
A.M. Best has assigned a debt rating of “bbb+” to the newly issued $450 million, 5.50 percent subordinated debentures, due 2052, of Aflac Inc. Additionally, there is a green shoe provision for Aflac to issue $67.5 million, or 15 percent, of the original deal size. The assigned outlook is stable.
The financial strength, issuer credit and existing debt ratings of Aflac and its life/health companies are unchanged. The assigned debt rating reflects the debentures’ subordinated status within Aflac’s capital structure. Specifically, these securities will rank junior to Aflac’s existing and future senior indebtedness, and do not restrict the company’s ability to incur additional debt that ranks senior to the debentures.
Fitch has assigned a 'BBB' rating to Aflac's recently announced $450 million, junior subordinated debentures issuance. Fitch also affirmed the 'A' long-term Issuer Default Rating (IDR) and the 'AA-' Insurance Financial Strength (IFS) ratings of Aflac Inc. and its insurance subsidiaries. The rating outlook is stable.
Fitch expects proceeds from the new debentures to be used for general corporate purposes. At June 30, 2012, Aflac's financial leverage and total financing and commitments (TFC) ratios were 22.4 percent and 0.3x, respectively. Fitch also notes that on July 31, 2012, Aflac issued $250 million of new securities under flexibility available to increase the size of a Feb. 15, 2012, issuance previously rated by Fitch. Pro forma for the new issuances, Aflac's financial leverage and TFC of 25.6 percent and 0.36x remain consistent with its rating category.
Allianz SE and its subsidiaries
Fitch has affirmed Allianz SE's Insurer Financial Strength (IFS) rating and long-term Issuer Default Rating (IDR) at 'AA-'. At the same time, the agency has affirmed Allianz's main subsidiaries at IFS 'AA'. The outlook for all ratings is stable.
The affirmation reflects Allianz's strong technical profitability, strong consolidated group capital position, broad diversification by geography and product, and solid business position in its key markets. In addition, the group's ratings also benefit from an investment mix of sound credit quality. Partially offsetting these rating factors are the currently suppressed technical profitability in the non-life business segment in the United States and Germany, and the challenging medium-term outlook for some of Allianz's life markets.
The subdued outlook for economic growth in the eurozone, low interest rates, and a possible intensification of the peripheral eurozone debt crisis create a challenging operating environment. For the remainder of 2012 and during 2013, the agency expects that sound underwriting profitability from the non-life business will help Allianz offset earnings from life insurance and investments, which are likely to be under pressure.
Moody's downgraded the subordinated debt ratings of Amlin Plc. to Baa3 from Baa2, and the insurance financial strength rating (IFSR) of Amlin Lloyd's syndicate 2001 to A2 from A1. The A2 IFSR on Amlin AG has been affirmed. The outlook for all ratings is stable.
Moody's said that the rating downgrades follow the deterioration in key financial metrics during 2011, driven by a significant reduction in equity, some potential constraints on future capital growth, and a still relatively high risk appetite. As a result, Moody's views Amlin's overall credit quality to be more appropriately positioned at A2 for insurance financial strength.
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