16 Insurers See Ratings Updates
Insurance Networking Ratings Corner, December 25, 2012
The rating affirmations reflect Mutual of Omaha’s strong absolute and risk-adjusted capitalization, good revenue and earnings growth within most of its core lines, generally favorable investment performance, and moderate use of financial and operating leverage.
The company continues to benefit from its well-diversified product portfolio, multi-platform distribution system and strong brand recognition. Somewhat offsetting these positives are the company’s growing book of Medicare Supplement business, overall exposure to commercial real estate, both in the general account and through affiliated holdings, and its in-force block of interest-sensitive liabilities.
Nationwide Mutual Insurance Co.
Fitch has affirmed the Insurer Financial Strength (IFS) ratings of Nationwide Mutual Insurance Co. (NMIC) and its related intercompany pool members (collectively, Nationwide Mutual), as well as Nationwide Life Insurance Co. (NLIC), at 'A'. In addition, Fitch has affirmed the ratings on NMIC's outstanding surplus notes at 'BBB'.
Fitch also has affirmed the following ratings of Nationwide Financial Services Inc. (NFS):
• Issuer Default Rating (IDR) at 'BBB+'
• Senior, unsecured notes at 'BBB'
• Trust preferred securities at 'BB+'.
The Rating Outlook is Stable for all ratings. The rating affirmation reflects Nationwide Mutual's strong competitive position in personal lines insurance, and a more moderate position in commercial lines insurance, which was enhanced by the merger with Harleysville Mutual Insurance Co. (Harleysville) in 2012.
Northwestern Mutual Life Insurance Co.
Fitch has affirmed the 'AAA' Insurer Financial Strength (IFS) ratings of The Northwestern Mutual Life Insurance Co. (NM) and Northwestern Long Term Care Insurance Co. (NLTC), collectively referred to as Northwestern. Fitch also affirms NM's 'AA+' Issuer Default Rating (IDR) and 'AA' surplus note rating. The Rating Outlook is Stable.
Fitch's ratings reflect Northwestern's very strong competitive position in the U.S. individual life insurance market, exceptionally strong balance sheet fundamentals, and stable earnings profile. Fitch considers Northwestern's key competitive advantages to include its successful distribution system, large and stable block of traditional life insurance, and focus on expense control.
Northwestern's extremely strong balance sheet fundamentals reflect the company's very strong risk-based capital position, modest financial leverage, excellent liquidity, and relatively low-risk liability profile. Total adjusted statutory capital (TAC) increased to $22.2 billion or 7 percent at Sept. 30, 2012, due to strong positive statutory operating earnings, and positive contributions from both net unrealized and realized investment gains. Fitch estimates Northwestern's risk-based capital was about 506 percent at Sept. 30, 2012. NM had surplus notes to TAC of about 7.9 percent and a total financial commitment ratio (TFC) of less than 0.2 times (x) at Sept. 30, 2012.
The Progressive Corp. and its subsidiaries
A.M. Best has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa” of the members of Progressive Agency Pool, Progressive Direct Pool and Progressive Commercial Auto Group (collectively known as Progressive). A.M. Best also has affirmed the FSR of A (Excellent) and ICR of “a+” of National Continental Insurance Co. Additionally, A.M. Best has affirmed the ICR of “a” and all debt ratings of the parent holding company, The Progressive Corp. The outlook for all ratings is stable.
The ratings reflect Progressive’s favorable capitalization, strong operating performance and sustainable competitive advantages. Progressive’s capitalization has benefited from consistently favorable underwriting results and a rebound in its investment portfolio, since the market downturn of 2008-2009.
Progressive continues to benefit from an innovative management team, brand name recognition, a multiple channel distribution platform, and innovative underwriting and claims handling technology. In addition, Progressive’s direct operations have continued to witness favorable growth, reflective of improved brand recognition.
Moody's has affirmed the Baa3 senior debt rating of State Auto Financial Corp. (State Auto) and the A3 insurance financial strength ratings of members of the State Automobile Mutual Group. Moody's changed the outlook to negative from stable, following continued weak underwriting profitability and execution risk associated with the company's earnings diversification strategy.
According to Moody's, the negative outlook reflects State Auto's weak profitability, which has been driven by ongoing weather-related losses in the company's homeowners' line, high combined ratios across commercial and specialty business segments, and a Q3 2012 reserve charge, related to the run-off of a commercial automobile program.
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