Ratings Roundup: Greenville, Delphi, First American, American Family, Well Point

April 25, 2008

A.M. Best Co. has affirmed the financial strength rating of ‘B’ (Fair) and issuer credit rating of “bb+” of Greenville Casualty Insurance Company, and has revised the outlook to positive from stable. “The rating affirmations reflect Greenville’s premium volatility, historically elevated expense structure and product and geographic concentrations, which are characteristics of its limited business profile,” Best observed. “However, these rating factors are partially offset by Greenville’s low underwriting leverage, favorable loss experience and highly liquid balance sheet.” Best said the positive outlook reflects its “expectation that Greenville’s improved operating results and level of capitalization will continue to trend favorably as management implements its gradual product and geographic expansion.”

Standard & Poor’s Ratings Services has said that its ratings on Delphi Financial Group ( BBB+/Stable) and its insurance subsidiaries “were not affected by its earnings decline in the first quarter of 2008. The decline was primarily attributable to mark-to-market losses in investments in limited partnerships and limited liability companies and the group’s trading account portfolio. Our ratings reflect management’s willingness to take leveraged and concentrated investment risk. Although DFG has reduced these activities in recent years, the group’s investment philosophy is more aggressive than those of most of its peers. The ratings reflect the resulting potential volatility.”

A.M. Best Co. has downgraded the financial strength rating (FSR) to ‘A-‘ (Excellent) from ‘A’ (Excellent) and issuer credit ratings (ICR) to “a-” from “a” of Santa Ana Calif.-Based First American Corporation Property Casualty Companies (First American P&C Group) and its member companies, First American Property & Casualty Insurance Company and First American Specialty Insurance Company. The outlook for all ratings is negative. Best said its rating actions “reflect the negative implications of the recent downgrading of the ICR and debt ratings of First American P&C Group’s parent holding company, First American Corporation, whose financial flexibility has been reduced. The downgrades have resulted in reduced access to capital and dividend requirements for First American P&C Group. On a stand-alone basis, First American P&C Group continues to exhibit favorable operating performance due in part to strong underwriting discipline. The outlook reflects the continuing pressures on First American P&C Group’s capitalization as a result of the reduced financial flexibility of First American.”

Fitch Ratings has affirmed the ‘AA-‘ insurer financial strength (IFS) rating of the American Family Insurance Group and has affirmed and withdrawn the ‘F1’ commercial paper (CP) rating of American Family’s consumer finance subsidiary, American Family Financial Services, Inc. (AFFS), and American Family Mutual Insurance Company’s short-term Issuer Default Rating (IDR). The ratings withdrawal was due to the termination of American Family’s CP program in January 2008. The rating outlook is stable. “American Family’s ratings reflect its strong capitalization, excellent market position and brand name, and adequate catastrophe reinsurance protection,” said Fitch. “Partially offsetting these positives are the effects of American Family’s limited amount of geographic diversification versus peers and the effects of heightened competitive conditions in the company’s key lines.”

Standard & Poor’s Ratings Services has revised its outlook on WellPoint Inc and its operating subsidiaries to negative from stable. At the same time, S&P affirmed its ‘A-‘ counterparty credit rating on WellPoint and its various counterparty credit and financial strength ratings on WellPoint’s subsidiaries. “”The negative outlook reflects the potential for longer-term weakness in its earnings profile, which has historically been a key strength to the rating,” explained S&P credit analyst Shellie Stoddard. “The company revised its earnings guidance on April 23, 2008, the second time in two months it has done so.”

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