American Financial, Zurich and 11 Others See Ratings Updates
Moody's and S&P react to Validus' acquisition of Flagstone; Tokio Marine and Willis also receive updates.
Insurance Networking Ratings Corner, September 4, 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:
Fitch has assigned a 'BBB+' rating to American Financial Group Inc.'s $125 million issuance of 5.75 percent, senior unsecured debt, maturing Aug. 25, 2042. Fitch has affirmed the 'A+' Insurer Financial Strength (IFS) ratings of AFG's principal operating subsidiaries as well as the following ratings for AFG:
• Issuer Default Rating (IDR) at 'A-'
• Senior unsecured notes at 'BBB+'.
The rating outlook is stable. Proceeds from the issuance are expected to be used to redeem AFG's 7.125 percent senior notes, which are callable on Sept. 28, 2012. AFG's pro forma financial leverage ratio (FLR) was 19.2 percent (excluding FAS 115 and secured subsidiary borrowings) at June 30, 2012, compared to 18.3 percent at Dec. 31, 2011.
GAAP EBIT-to-fixed charge coverage was 6.3x for the first six months of 2012 and remained within ratings expectations. Debt-servicing capabilities remain ample, due to solid operating company maximum dividend capacity and holding company cash and investments.
A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit rating (ICR) of “a” of Centurion Life Insurance Co. (Centurion Life). The outlook for both ratings is negative. In addition, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of “a-” of Centurion Casualty Co. (Centurion Casualty). The outlook for these ratings is stable. Concurrently, A.M. Best has withdrawn both companies’ ratings, as management has requested to no longer participate in A.M. Best’s interactive rating process. Centurion Life and Centurion Casualty are owned by Wells Fargo Financial Inc. (WFFI), which, ultimately, is owned by Wells Fargo & Co.
The affirmation of the ratings for Centurion Life reflects its continued strong risk-adjusted capital position and consistently positive statutory operating earnings, while the negative outlook reflects its diminished business profile. The company’s core credit insurance lines of business have been placed in runoff since 2010, when Centurion Life’s main distribution channel, WFFI, discontinued its consumer lending operations. Also in 2010, Centurion Life stopped issuing single, premium deferred annuities, due to spread compression issues.
Centurion Casualty’s ratings acknowledge its excellent, risk-adjusted capitalization and consistently profitable operating results. Partially offsetting these positive rating factors is that the majority of the company’s business, including its dominant involuntary unemployment insurance, currently is in runoff, due to WFFI – its main distribution channel – having discontinued its consumer lending activities.
Moody's has upgraded the credit ratings of CNO Financial Group Inc. (CNO, senior secured to Ba3 from B1) and the insurance financial strength (IFS) ratings of CNO's main operating companies: Bankers Life and Casualty Co. (Bankers Life), Washington National Insurance Co., and Colonial Penn Life Insurance Co. to Baa3 from Ba1. The rating outlook on CNO and all of its insurance affiliates is stable. The rating action concludes a review that was initiated on May 3, 2012.
Moody's said CNO has strengthened substantially its financial flexibility with the actions it has taken to reduce debt and improve holding company liquidity, and the company also has enhanced its risk management. The rating agency added that CNO's gradually increasing sales and stronger operating earnings, coupled with improved investment performance, have translated, during the last several quarters, into sustainable, more robust profitability and stronger capital adequacy.
The rating agency said that CNO's ratings reflect the company's good captive distribution force at Bankers Life as well as CNO's strategic focus on the less crowded and less ratings sensitive "middle America" market – seniors and middle income individuals – where the company has demonstrated success. According to Moody's, CNO also has a good quality and liquid investment portfolio. The investment portfolio does include non-agency RMBS and CMBS securities, totaling about $3.4 billion, with roughly 95 percent of these securities classified as NAIC 1 or 2.
A.M. Best has downgraded the financial strength rating to B++ (Good) from A- (Excellent) and issuer credit ratings to “bbb” from “a-” of Lexon Insurance Co. (Lexon) and its affiliate, Bond Safeguard Insurance Co. (Bond Safeguard). The outlook for all ratings has been revised to negative from stable.
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