Prudential, CIGNA and 11 Others Receive Ratings Updates
Four U.S. insurers re-evaluated after U.S. outlook downgrade; Assured, Penn Mutual, TWA and several others also assessed.
Insurance Networking Ratings Corner, December 6, 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:
'AAA' Insurance Ratings for Four Insurers Remain Intact After U.S. Negative Outlook
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Fitch says it will not change the four 'AAA' rated U.S. insurance companies' rating outlooks to negative from stable, following a November 28 revision of the U.S. government's 'AAA' sovereign rating outlook to negative from stable.
New York Life Insurance Co., Northwestern Mutual Life Insurance Co., Teachers Insurance and Annuity Association of America and United Services Automobile Association top-notch 'AAA' insurer financial strength ratings are neither directly, nor indirectly, linked to government support and, therefore, are not capped at the rating of the U.S. government. Accordingly, the rating outlooks for all four groups of companies remain stable.
Fitch maintains its view that each company demonstrates strong levels of capital, liquidity, and franchise value independent of government support. Therefore, each group's ratings and outlooks remain intact, despite the U.S. sovereign rating outlook action. Furthermore, in the event of a future U.S. sovereign downgrade, Fitch believes it would be reasonable for the four 'AAA' companies to maintain ratings potentially one to two notches higher than the U.S. government's rating.
S&P lowered its counterparty credit and financial strength ratings on Assured Guaranty Municipal Corp. (AGM) and Assured Guaranty Corp. (AGC) to 'AA-' from 'AA+'. S&P also lowered the rating on Assured Guaranty Re Ltd. (AG Re) to 'AA-' from 'AA' and lowered its counterparty credit rating on Assured Guaranty Ltd. (AGL) to 'A-' from 'A+'. The ratings on the companies were removed from CreditWatch, where they were placed on Sept. 27, 2011, with negative implications. The outlook is stable.
S&P said the 'AA-' financial strength ratings on AGM, AGC, and AG Re reflect a view, based on the agency’s updated bond insurance criteria, of a strong competitive position and strong capital. However, the consolidated group of insurance companies, though maintaining strong capital, does not maintain enough capital to mitigate largest obligor (LOT) concentrations for a higher rating. The LOT concentrations could add volatility to the companies' capital and operating performance, and, hence, limit the rating without additional capital to mitigate this risk.
The companies also have a solid market presence and consistent track record of profitably underwriting U.S. public-finance transactions. S&P views the companies' operating performance as a marginal weakness, partly because of a decline in the U.S. public finance risked-adjusted pricing ratio to 8 percent in 2010 from 9.7 percent in 2009, and expectations that it may continue to fall. In addition, continued stress as a result of the 2005 to 2007 exposure to residential mortgage-backed securities may hurt operating performance.
CIGNA Corp. and its subsidiaries
A.M. Best has affirmed the issuer credit rating (ICR) of “bbb” and debt ratings of CIGNA Corp. (CIGNA). Concurrently, A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and ICRs of “a” for the following subsidiaries of CIGNA: Connecticut General Life Insurance Co. (CGLIC), Life Insurance Co. of North America, CIGNA Life Insurance Co. of New York, CIGNA Health and Life Insurance Co., CIGNA Worldwide Insurance Co. (CIGNA Worldwide), as well as the medical health maintenance organizations (HMO) and dental HMO subsidiaries of CIGNA. The outlook for these ratings is stable.
A.M. Best has assigned an FSR of A (Excellent) and ICR of “a” to CIGNA Arbor Life Insurance Co. (CIGNA Arbor). The outlook for these ratings is stable. In January 2011, CGLIC reinsured all of it run-off Guaranteed Minimum Death Benefit and Guaranteed Minimum Income Benefit business to CIGNA Arbor and contributed $150 million of capital to Arbor in support of these liabilities. Although CIGNA Arbor currently is adequately capitalized for its risks, A.M. Best expects CGLIC and CIGNA to continue to provide capital support to CIGNA Arbor, if necessary.
Furthermore, A.M. Best has assigned a debt rating of “bbb” to $600 million, 2.75 percent senior unsecured notes, due Nov. 15, 2016; $750 million, 4 percent senior unsecured notes, due Feb. 15, 2022; and $750 million, 5.375 percent senior unsecured notes, due Feb. 15, 2042. The outlook for these ratings is stable.
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