Fitch Releases ‘Prism Scores’ for 99 U.S. Insurance Groups

November 7, 2007

Fitch Ratings has released a new report outlining the “Prism scores” for 99 U.S. life and non-life insurance groups using 2006 year-end data. “Prism is Fitch’s global stochastic economic capital model for insurance organizations and is now a key component in the rating process,” the announcement explained. Fitch also noted that that it had “identified ten insurers whose Prism Scores and accompanying analysis led to a change in Fitch’s view of capital adequacy.”

The review collected data on 76 percent of the total U.S. life insurers with $3.6 trillion of life industry assets, and approximately 63 percent of the total U.S. non-life industry with $284 billion of industry net written premium. Fitch said the companies covered represent “essentially all rated life and non-life companies where U.S. operations are an important part of the insurer’s business mix.”

The bulletin further explained that the “Prism Score simply reflects the highest capital level threshold at which Available Capital meets (or exceeds) Required Capital. Accordingly, the Prism Score is stated in terms of a rating scale level, such as ‘AAA’ or ‘BBB+’. The distribution of Prism Scores for these 99 groups was 59 percent at ‘AAA’, 22 percent in the ‘AA’ categories, 18 percent in the ‘A’ categories and 1 percent in the ‘BB’ categories. The average Prism scores for life insurers were ‘AA+’ and ‘AA’ for non-life companies as of both year-end 2006 and 2005.”

As a result of its new appraisal Fitch found that ten groups had “Prism results that were materially outside of Fitch’s previous view of capital adequacy. The new information provided by the Prism analysis contributed in part to the following rating actions or commentary:
–CNA Financial Corporation received a one notch upgrade for all ratings, including subsidiary Insurer Financial Strength (IFS) rating upgrades to ‘A’ from ‘A-‘ on Oct. 5, 2007;
–The Doctor’s Company Group’s IFS rating of ‘A-‘ was placed on Rating Watch Positive on Oct. 16, 2007;
–Guardian Life Insurance Company of America’s IFS rating was upgraded to AA+ from AA on Oct. 29, 2007;
–HCC Insurance Holdings, Inc. received a one notch upgrade for all ratings, including subsidiary IFS rating upgrades to ‘AA’ from ‘AA-‘ on Oct. 15, 2007;
–Old Mutual U.S. Life Holding insurance subsidiary ratings of ‘A-‘ were not changed at this time – Fitch will evaluate how the company’s Prism score fits within its overall view of the global Old Mutual organization;
–PMA Capital Corp. received rating upgrades on Sept. 25, 2007, including an upgrade in the IFS ratings of its three active insurance subsidiaries to ‘BBB+’ from ‘BBB-‘;
–ProAssurance Corporation’s ratings were upgraded one notch on Nov. 6, 2007, including its insurance subsidiaries IFS ratings to ‘A’ from ‘A-‘;
–RLI Corp. had its ratings, including insurance subsidiaries’ ‘A’ IFS ratings, moved to a Positive Outlook on October 1, 2007;
–Safeco Corporation’s ratings were upgraded one notch on Oct. 1, 2007, including the IFS ratings to ‘AA’ from ‘AA-‘; and
–StanCorp Financial Group, Inc. ratings were downgraded one notch on Nov. 6, 2007 including its insurance subsidiaries IFS ratings to ‘A+’ from ‘AA-‘.

The report – “2006 Prism Results for U.S. Life and Non-Life Insurers”, published Nov. 6, 2007, is available at: In the report, Fitch presents individual company Prism Scores using year-end 2006 and 2005 data, as well as aggregate industry results and commentary.

Source: Fitch Ratings

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