16 Insurers See Ratings Updates
Travelers, Progressive and 14 others receive updates; Aviva and Athene both evaluated following acquisition.
Insurance Networking Ratings Corner, December 25, 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 affirmed the 'A' Insurer Financial Strength (IFS) ratings of Alterra Capital Holdings Ltd.'s (Alterra) insurance subsidiaries. The Rating Outlook is Stable. Additionally, Fitch has placed on Rating Watch Negative Alterra's 'A-' Issuer Default Ratings (IDR) and 'BBB+' senior debt ratings.
Fitch's rating action follows the announcement that Markel Corp. (Markel) intends to acquire Alterra, with the transaction expected to close in the first half of 2013. The affirmation and Stable Outlook on Alterra's 'A' IFS ratings reflects that they are rated the same as Markel's IFS ratings and would likely be affirmed at this level upon closing of the merger. The affirmation also reflects Alterra's solid capitalization, sizable underwriting platform, strong earnings track record, and disciplined and flexible approach to managing risk.
The Rating Watch Negative on Alterra's IDR and debt ratings reflects that, upon the closing of the pending acquisition, Fitch will align Alterra's debt ratings with those of Markel under a consolidated U.S. entity approach. This will result in a one-notch downgrade to Alterra's IDR and debt ratings, based on Fitch's notching guidelines for a U.S. regulatory environment.
Athene Annuity & Life Assurance Co.
Fitch has placed the 'BBB+' Insurer Financial Strength (IFS) rating of Athene Annuity & Life Assurance Co. (Athene) on Rating Watch Negative. The rating action follows the announcement that Athene Holding Ltd. (AHL) will be acquiring the U.S. annuity and life operations (Aviva USA) of Aviva Plc. for $1.55 billion. Following close, Aviva USA's insurance operations will become wholly owned subsidiaries of Athene.
Fitch views this transaction as a transformational event for Athene, due to the large block of the existing business and the significant new business infrastructure Athene will acquire. The transaction is expected to increase Athene's aggregate liabilities to more than $60 billion and, thus, provide greater economies of scale. The combined entities will become the second-largest issuer of fixed-
indexed annuities in the United States.
Offsetting these positives is the financing risk associated with the transaction. Apollo Global Management LLC has agreed to provide up to $100 million of capital support to Athene. However, Athene will need to secure additional capital support prior to close. This could include the issuance of debt or equity, or the use of reinsurance.
Aviva Life and Annuity Co. and its subsidiary
A.M. Best has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and issuer credit ratings (ICR) to “a-” from “a” of Aviva Life and Annuity Co. (ALAC) and its wholly owned subsidiary, Aviva Life and Annuity Co. of New York (ALACNY) (together referred to as Aviva USA). Concurrently, the ratings have been placed under review with negative implications.
Both ALAC and ALACNY are the principal insurance subsidiaries of Aviva USA Corp., which is an indirect, wholly owned subsidiary of Aviva Plc. (Aviva). Aviva is a global diversified financial services company.
The rating actions follow the Dec. 21, 2012, announcement by Aviva that it had agreed to sell Aviva USA Corp. to Athene Holding Ltd. for $1.8 billion. Aviva will receive sales proceeds of $1.55 billion in cash, after the repayment of external debt. Of this, an amount of up to $250 million may be received in the form of an interest-bearing vendor loan, repayable in cash within 12 months of completion. The transaction is expected to close in 2013, subject to regulatory and other customary approvals.
S&P lowered to 'A+' from 'AA-' its financial strength and long-term counterparty ratings on AXA Life Insurance Co. Ltd. The outlook on the financial strength and long-term counterparty ratings is stable. AXA Life Insurance is a Japanese subsidiary of AXA Group, one of the world's largest insurance and financial groups. Under S&P’s group rating methodology for insurance companies, the ratings agency considers AXA Life Insurance as a core subsidiary within AXA Group.
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