17 Insurers See Ratings Updates
Alfa, Allianz, Prudential, State Farm, Swiss Re, USAA and others receive updates.
Insurance Networking Ratings Corner, December 27, 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:
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A.M. Best has downgraded the financial strength ratings (FSR) to A (Excellent) from A+ (Superior) and the issuer credit ratings (ICR) to “a+” from “aa-” for Alfa Insurance Group (Alfa or the Alfa Group), its members and Alfa Life Insurance Corp. (Alfa Life). The outlook for all FSRs has been revised to stable from negative, and the outlook for Alfa Life’s ICRs also has been revised to stable from negative. The outlook for the ICRs of Alfa Group remains negative.
The ratings for the Alfa Group reflect its supportive risk-adjusted capitalization, strong business profile in Alabama and actions taken by management to reduce catastrophic exposure and improve earnings.
These strengths are offset partially by a concentration of risk in Alabama and unfavorable operating performance, which has contributed to a decline in capitalization and led to the current rating actions. This is due, primarily, to losses from an increase in catastrophic weather events in recent years. Additionally, earnings in 2011 have fallen significantly below expectations, due to increased frequency of storm activity, and the devastating tornados that struck Alabama and other southern states in April. While the outlook for the FSRs was revised to stable, the outlook for Alfa Group’s ICRs remains negative and is reflective of the pressure on the ratings, due to the company’s exposure to hurricanes and other severe weather events in the Southern Gulf states, as well as the current trend of unfavorable earnings and loss of capital.
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 main Allianz subsidiaries have been affirmed 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 by 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 is the currently suppressed technical profitability in the non-life business segment, partly driven by claims, due to severe weather-related events and natural catastrophes in 2010 and 2011. For 2011, however, Fitch expects the insurer at least to come close to its EUR8bn operating profit target.
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. During 2012 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.
S&P assigned a rating of 'AA-' to Aviva Re Ltd. (also known as Aviva Re Bermuda) and placed it on CreditWatch with negative implications.
Aviva Group has made changes to its legal structure. It has reviewed its internal reinsurance strategy, not least in the light of the anticipated effect on group diversification benefits and capital management of Solvency II (the EU's directive on the supervision of insurance and reinsurance companies).
As a result, the group has decided to transfer internal reinsurance activity, in particular that for its European life business, from Aviva Re Europe to other group entities, including Aviva Re Bermuda. From Dec. 31, 2011, the reinsurance contracts currently within Aviva Re Europe either will be transferred to Aviva Re Bermuda or be recaptured by the ceding internal companies.
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 The Cincinnati Insurance Co.s (CIC) and its standard market property/casualty members.
Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICR of "a+" of The Cincinnati Life Insurance Co. (Cincinnati Life). Additionally, A.M. Best has downgraded the ICR to "a-" from "a" and debt ratings of CIC and Cincinnati Life's publicly traded parent, Cincinnati Financial Corp. The outlook for these ratings is stable.
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