OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and Long-Term Issuer Credit Ratings (Long Term ICR) of “a+” of the U.S. property/casualty subsidiaries of Assurant, Inc. (Assurant) (headquartered in New York, NY) (NYSE:AIZ). Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” for the core life/health subsidiaries of Assurant, which comprise the organization’s domestic and foreign preneed life insurance business, as well as its credit life and health insurance operations. Additionally, A.M. Best has affirmed the Long-Term ICR of “bbb+”and the Long- and Short-Term Issue Credit Ratings (Long-Term IR; Short-Term IR) of Assurant. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed list of the companies and Long- and Short-Term IRs.)
A.M. Best also has affirmed the FSR of B+ (Good) and the Long-Term ICRs of “bbb-” of Time Insurance Company and John Alden Life Insurance Company (both domiciled in Milwaukee, WI), known collectively as Assurant Health. The outlook of these ratings is stable. A.M. Best has withdrawn the ratings as the companies have requested to no longer participate in A.M. Best’s interactive ratings process.
The rating affirmations of Assurant’s property/casualty subsidiaries reflect their strong operating performance, supportive risk-adjusted capitalization and well-established presence in various specialty markets.
Offsetting these positive rating factors are the group’s significant exposure to natural catastrophes and its dependence on third-party reinsurance.
These positive rating attributes are derived from the organization’s leadership position in the delivery of lender-placed homeowners insurance, mobile protection insurance, multifamily housing products, vehicle service contracts, extended service contracts, credit-related insurance products and manufactured housing insurance, as well as a vast customer base through its large number of distribution sources in North America. The group’s diversified product and distribution platforms, along with its technology focus, have delivered strong earnings over the past five years despite catastrophe losses and the adverse impact of weak macroeconomic conditions on revenue, particularly for the service contract business.
Somewhat offsetting these positive ratings factors are the property/casualty group’s natural catastrophe exposure, and its continued dependence on third-party reinsurance. These factors expose the property/casualty group’s earnings to a degree of variability. These concerns are somewhat mitigated by its geographic spread of risk, management’s use of risk management tools, including tracking aggregation of risks, and product design.
Price reductions and lower placement rates in the group’s lender-placed hazard product have impacted underwriting revenues from the insurance operations; however, A.M. Best anticipates underwriting profitability to remain strong. At the enterprise level, expansion of non-insurance service products continues to diversify the mix of business and minimize the impact of this reduction on overall revenues and returns over time.
Also offsetting the positive rating factors is the importance of consumer credit in driving usage of many of the property/casualty products. The property/casualty group could be challenged to sustain current premium levels due to lower credit usage. At the same time, higher utilization may result in deteriorating loss performance.
A.M. Best will continue to monitor the effect of macroeconomic conditions, including suppressed activity in the mortgage service industry, on the property/casualty group’s underwriting and operating profitability.
Assurant’s ratings recognize its diverse business mix, established presence in numerous niche markets, strong operating results and risk-adjusted capitalization. As of Dec. 31, 2016, Assurant’s unadjusted debt-to-capital and debt-to-tangible capital ratios were approximately 21% and 27%, respectively, with a fixed charge coverage ratio that is well supportive of its ratings. Assurant also maintains a $400 million commercial paper program, which is secured by a back-up $400 million credit facility.
The rating affirmations of Assurant’s core life/health operations, which include preneed and credit insurance, reflect favorable operating results in these segments and sound capitalization across all of the entities. The affirmations also reflect Assurant’s established competitive positions and recognized presence within its specific target markets.
The ratings of Assurant’s domestic and Canadian preneed companies — American Memorial Life Insurance Company (American Memorial) (Rapid City, ND) and Assurant Life of Canada (ALOC) (Toronto, Canada) — acknowledge their consistent statutory premium growth trends, favorable operating earnings and adequate risk-adjusted capital positions. Within these operations, American Memorial is one of the largest writers of preneed life insurance in the United States, and ALOC is by far the leading writer in the Canadian preneed market. American Memorial’s preneed business sales are tied to one distribution channel, which exposes the segment to significant concentration risk. However, A.M. Best notes that the company has added new product offerings in recent periods, including its final need insurance product line. A.M. Best also notes that distribution is much more diverse within the Canadian operations.
While the persistent low interest rate environment continues to present a challenge for many companies marketing preneed and final expense products, sales and operating earnings continue to be favorable due to additional product options and new distribution partners. A.M. Best notes that American Memorial maintains a more-elevated exposure to higher risk and less liquid assets, including below investment grade bonds and commercial mortgage loans, in its investment portfolio than Assurant’s other life/health insurance entities. However, this risk is partially mitigated by the company’s strong risk management capabilities, including its asset-liability management program.
The ratings of Assurant’s credit life and health insurance companies — American Bankers Life Assurance Company of Florida (Miami, FL) and Caribbean American Life Assurance Company (San Juan, PR) — recognize their stable earnings and solid capitalization, despite declining levels of capital and surplus over the past several years due to dividends paid to the holding company and a contracting business. The companies continue to experience declining premiums due to economic pressures and changes in the regulatory environment in the United States. In addition, the companies have been impacted by unfavorable foreign currency fluctuations in recent periods. However, A.M. Best recognizes that Assurant remains focused on growing credit life and health insurance premiums in Canada and Puerto Rico, where the regulatory environment remains more favorable for credit insurance products. A.M. Best also notes that Assurant remains a recognizable name in these markets. A.M. Best expects overall premiums to continue to decline but should stabilize somewhat as the group focuses on growing its business outside of the United States.
The ratings of Union Security Insurance Company (USIC) (headquartered in Kansas City, MO) and Union Security Life Insurance Company of New York (USLICNY) (Fayetteville, NY), which had historically housed the employee benefits business prior to its sale to Sun Life Financial, Inc. (Sun Life) in March 2016, reflect the relatively high creditworthiness of the remaining preneed insurance business, which continues to contribute favorable operating results despite pressures from the low interest rate environment. In addition, A.M.
Best expects these entities will remain well capitalized and supported by Assurant as needed. Additionally, USIC and USLICNY, per the terms of the transaction agreement, will continue to write employee benefits business that will be 100% ceded to Sun Life for a period of time. A.M. Best will continue to monitor the runoff of the remaining business in these entities, with a focus on profitability, capital adequacy and implicit and explicit support, as well as any changes in the operational and strategic use at these legal entities.
Assurant Health’s primary business was the sale of individual medical, short-term medical and small employer group health insurance sold through a network of independent agents and third party administrators. In June 2015, Assurant publicly announced its plan to substantially complete its exit from the health insurance market in 2016. Assurant Health had experienced significant losses in 2014 and 2015 primarily due to the impact of health care reform and regulatory changes that took effect in late-2013, after rates on metallic plans were filed and approved, allowing policy holders to keep their plans (known as grandmothering), as well as expenses related to the run-off of the business. However, the majority of medical business has lapsed as of year-end 2016 and only a minimal amount of business remains in the group.
The FSR of A (Excellent) and the Long-Term ICRs of “a+” have been affirmed with a stable outlook for the following property/casualty subsidiaries of Assurant, Inc.:
- American Bankers Insurance Company of Florida
- American Security Insurance Company
- Standard Guaranty Insurance Company
- Caribbean American Property Insurance Company
- Voyager Indemnity Insurance Company
- Reliable Lloyds Insurance Company
The FSR of A- (Excellent) and the Long-Term ICRs of “a-” have been affirmed with a stable outlook for the following life/health subsidiaries of Assurant, Inc.:
- Union Security Insurance Company
- Union Security Life Insurance Company of New York
- American Memorial Life Insurance Company
- American Bankers Life Assurance Company of Florida
- Caribbean American Life Assurance Company
- Assurant Life of Canada
The following Long-Term IRs have been affirmed with stable outlook:
-- “bbb+” on USD 475 million 6.75% senior unsecured bonds, due 2034
-- “bbb+” on USD 350 million 2.50% senior unsecured bonds, due 2018
-- “bbb+” on USD 350 million 4.00% senior unsecured bonds, due 2023
The following Short-Term IR has been affirmed:
-- AMB-1 on commercial paper
The following indicative Long-Term IRs on securities available under the shelf registration have been affirmed with stable outlook:
-- “bbb+” on senior unsecured
-- “bbb” on subordinated debt
-- “bbb-” on preferred stock
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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