Aetna, USAA and 14 Others See Ratings Updates
ING affected by fourth-quarter hits taken overseas; Liberty Mutual, State Auto and several others also assessed.
Insurance Networking Ratings Corner, December 13, 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:
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Moody's has assigned provisional debt ratings (senior debt at (P)Baa1) to Aetna Inc.'s (Aetna) new shelf registration statement. The outlook on the ratings is stable. Aetna maintains its shelf registration statement for general corporate purposes.
Moody's said that the new shelf replaces Aetna's previous shelf registration statement, filed in December 2008. Moody's has assigned provisional debt ratings to securities that may be issued under Aetna's shelf registration statement as follows.
• Provisional senior unsecured debt at (P)Baa1;
• Provisional subordinated debt at (P)Baa2;
• Provisional preferred stock at (P)Baa3.
The rating agency stated that the ratings could be upgraded, if EBITDA margins remain in the 9% range, if medical membership grows by at least 3 percent on an annual basis, if adjusted EBITDA interest coverage is at least 10 times, and adjusted debt-to-capital is at or below 35 percent. However, if there is a debt-financed acquisition that significantly increases financial leverage and involves substantial integration issues, if EBITDA margins fall below 4%, or if there is a decrease in the consolidated risk-based capital ratio below 250 percent, Moody's said that the ratings may be downgraded.
American Enterprise Group Inc. Subsidiaries
A.M. Best has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit ratings of “a-” of American Republic Insurance Co. (American Republic), World Insurance Co. (World), as well as American Republic Corp Insurance Co. (American Republic Corp), a subsidiary of American Republic, and World Corp Insurance Co. (World Corp), a subsidiary of World (collectively known as American Enterprise Group). American Republic and World are both subsidiaries of American Enterprise Group Inc., which is the intermediate holding company in the organization’s mutual holding company structure.
The revised outlook is based on the organization’s decision to exit the individual major medical line of business. A.M. Best believes the health care reform legislation would pressure future operating results in American Enterprise Group’s individual major medical segment. However, the individual major medical business represents nearly one-half of total premium revenue, and will result in a reliance primarily on the Medicare supplement business. This exposes the American Enterprise Group to regulatory and market risks, as well as increased competition from larger, more aggressive carriers.
The rating affirmations reflect American Enterprise Group’s solid, risk-adjusted capital position and its established history of marketing Medicare supplement products to niche markets, chiefly in the Midwest. American Republic Corp and World Corp’s ratings reflect the explicit support each company receives from American Republic. This is evidenced by the material quota share reinsurance and capital support agreements with the two companies and American Republic.
Bison Insurance Co. Ltd.
A.M. Best has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Bison Insurance Co. Ltd. The outlook for both ratings is stable.
The ratings reflect the company's historically adequate capitalization, generally favorable operating performance, conservative reserve levels and effective enterprise risk-management controls. The ratings also recognize Bison's history of maintaining sufficient capital and financial resources to support its ongoing obligations.
Partially offsetting these positive rating factors are the company's volatile underwriting results, due to its low-frequency, high-severity risk profile, coupled with its high net retained limits, relative to its available capital. Additionally, the continually changing risk profile of Bison's primary insureds directly impacts Bison’s risk profile. This is mitigated by the company’s conservative reserving philosophy and the ongoing, demonstrated support from its parent, Duke Energy Corp.
Citizens Security Life Insurance Co.
A.M. Best has upgraded the financial strength rating to B- (Fair) from C++ (Marginal) and issuer credit rating to “bb-” from “b+” of Citizens Security Life Insurance Co. The outlook for both ratings is stable.
The rating actions reflect Citizens Security’s stabilized capital position, which, primarily, is a result of a late-2010 reinsurance transaction, whereby the company ceded most of its ordinary life insurance block. With the exit of the life insurance business, the company in 2011 has demonstrated positive operating results in its now core group accident and health (dental and vision) business line.
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