Travelers, MassMutual and 12 Other Insurers See Ratings Updates
Cincinnati Financial and Kemper Corp. among several others also receiving updates.
Insurance Networking Ratings Corner, November 27, 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:
Moody's has lowered the insurance financial strength ratings (IFS) of Affirmative Insurance Co. (AIC) and Insura Property and Casualty Insurance Co. (Insura), both subsidiaries of Affirmative Insurance Holdings Inc. (Affirmative), to Caa1 from B3. In the same rating action, Moody's also confirmed the corporate family rating of Affirmative at Ca and the senior secured credit rating of its bank credit facility at Ca. The rating actions conclude a ratings review initiated on Aug. 22, 2012, and reflect Affirmative's continued weak operating profitability and deteriorating cash flow position, despite the resolution of a deficiency with a loss reserve requirement under the Illinois Insurance Code. The outlook for the ratings remains negative.
Moody's also also withdraw its rating on Insura as the company was merged into AIC on Nov. 19, 2012. Please refer to the Moody's Investors Service's Policy for Withdrawal of Credit Ratings, available at www.moodys.com.
According to Moody's, the downgrade of the IFS ratings reflects the continued poor profitability of the company's regulated insurance operations. Moody's notes that AIC reported a decline in surplus of 21 percent (to $54.7 million) for the first nine months of 2012, following a 19 percent decline in 2011. AIC also posted negative statutory operating cash flows of $49.5 million for the first nine months of 2012, following negative operating cash flows of $84 million in 2011, while net written premium volume fell by 3.5 percent during the first nine months of 2012.
A.M. Best has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Aurigen Reinsurance Co. and Aurigen Reinsurance Ltd. (collectively known as Aurigen). The outlook for the ratings is stable.
The ratings of Aurigen are based upon its excellent risk-adjusted capital position and modest consolidated earnings. While the company still is considered in its early stage of operating history, it is focused on the Canadian life reinsurance marketplace with plans to expand into the United States market.
During the last year, Aurigen was able to grow its revenues, maintain a robust capital position, continue to prudently gain traction in a concentrated market, and now has reinsurance treaties in place with the largest accounts in Canada. A.M. Best views Aurigen’s business plan as opportunistic and believes it may be difficult for Aurigen to grow its market share quickly in the established and concentrated Canadian market.
A.M. Best has downgraded the issuer credit rating (ICR) to “bbb” from “bbb+” and affirmed the financial strength rating (FSR) of B++ (Good) of Bar Plan Mutual Insurance Co. (The Bar Plan). The outlook for the FSR has been revised to negative from stable, while the outlook for the ICR is negative.
These rating actions reflect the significant reserving actions taken by management, which culminated in substantial underwriting and operating losses posted in Q2 2012, as well as a reduction in capitalization. Underwriting losses spiked during 2012 due to a deficiency in case loss reserves caused by an unexpected rise in claims severity and defense costs. While management is confident in the reserve actions taken, the negative outlook reflects the potential for future reserve strengthening as well as some concerns regarding internal controls as these actions were brought on by discrepancies later recognized in internal claims handling and reserving practices. Management’s actions also come in the wake of recent management changes in the claims department, which since have been resolved.
Despite these actions, the ratings of The Bar Plan reflect its supportive capitalization and leadership position in providing lawyer professional liability (LPL) insurance, primarily to sole practitioners and small law firms operating mainly in its core state of Missouri.
Fitch has affirmed the 'A+' Insurer Financial Strength (IFS) ratings of Cincinnati Financial Corp.'s (CINF) three standard market property and casualty insurance subsidiaries and its life insurance subsidiary. Fitch also has affirmed the following ratings for CINF:
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