Swiss Re, Zurich and 15 Others Receive Ratings Updates
Transatlantic, Alleghany assessed after merger announcement; AEGON, Axis, Guaranty and several others updated.
Insurance Networking Ratings Corner, November 29, 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:
AEGON and its subsidiaries
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Fitch has affirmed AEGON N.V.'s (AEGON) 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 at 'AA-'. The outlooks on AEGON's long-term IDR and the IFS ratings of its primary North American life insurance subsidiaries are stable.
The affirmations reflect AEGON's recent operating performance, with Q311 results in line with Fitch's expectations, and the company's ongoing execution of its strategy to focus on core operations, scale back non-core operations and improve operating efficiency.
AEGON's ratings continue to reflect its strong capitalization; diversification of both products and distribution, particularly in U.S. retail markets; its measured risk appetite; and its focus on cost control.
Alleghany Corp. and its subsidiaries
A.M. Best has commented that the ratings of Alleghany Corp. (Alleghany) and its subsidiaries are unchanged, following the announcement of a definitive agreement under which Transatlantic will combine with Alleghany. All of the rated operating companies of both organizations maintain their respective financial strength ratings, issuer credit ratings and outlooks.
The transaction brings two complementary organizations together. Alleghany's specialty insurance platform and Transatlantic's reinsurance platform, combined with a shared philosophy of underwriting discipline, will bring greater diversification of earnings, cash flow sources and business by geography, product and distribution to Alleghany. Significant liquidity at the parent company level also is expected to be maintained. The transaction is expected to be finalized in the first quarter of 2012, subject to customary regulatory and shareholder approvals.
S&P affirmed its 'BBB' long-term counterparty credit rating on Alleghany; the outlook is stable.
S&P said these rating actions follow the announcement by Alleghany and Transatlantic that they have entered into a definitive agreement to merge with a stock-for-stock exchange and cash. Specifically, Transatlantic common shares will be exchanged for 0.145 Alleghany common shares and $14.22 in cash. Based on Alleghany's closing stock price of $314.26 as of Nov. 18, 2011, the $3.4 billion transaction will be funded with $816 million in cash, which is held in the form of marketable securities on Alleghany's parent company's balance sheet and $2.6 billion in stock. S&P does not expect any upcoming debt issuances to fund the transaction.
Fitch has affirmed the 'A+' Insurer Financial Strength (IFS) ratings of American Financial Group Inc.'s principal operating subsidiaries. Fitch also has affirmed the following ratings for AFG:
• Issuer Default Rating (IDR) at 'A-';
• Senior unsecured notes at 'BBB+'.
The rating outlook is stable.
The affirmation reflects AFG's ratings strengths, which include consistently solid underwriting performance in its specialty property/casualty (P/C) operations, along with adequate statutory capital levels and strong liquidity at both the holding company and operating subsidiary levels.
Ratings concerns are related primarily to the challenges posed by competitive market conditions affecting several of AFG's core specialty businesses. The company reported a combined ratio of 95.5 percent through nine months of 2011, which, while better than the industry, has deteriorated from 88.5 percent and 82.7 percent for the full years 2010 and 2009, respectively. In addition, investment income has been challenged by the low-interest-rate environment, and Fitch believes uncertainty regarding loss reserve development in the company's longer-tail liabilities is likely to increase.
A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a+" of AXIS Specialty Ltd. (AXIS) and its operating affiliates. Concurrently, A.M. Best has revised the outlook to positive from stable and affirmed the ICR of "bbb+" and all existing debt ratings of AXIS Capital Holdings Ltd.
Additionally, A.M. Best has downgraded the FSR to B++ (Good) from A (Excellent) and ICR to "bbb+" from "a+" of AXIS Specialty Insurance Co. The outlook for both ratings is stable. Subsequently, A.M. Best has withdrawn the ratings, due to management's plans to cease writing new business, and, thus, place this company in run off.
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