OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long Term ICR) of “a+” of the U.S. property/casualty (P/C) subsidiaries of Assurant, Inc. (Assurant) (headquartered in New York, NY) [NYSE: AIZ]. In addition, AM Best has affirmed the FSR of A- (Excellent) and the Long Term ICRs of “a-” of the core U.S. life/health (L/H) subsidiaries of Assurant, which comprise the organization’s current writers of domestic and foreign preneed life insurance, and U.S. and Canada-based credit life and health insurance operations. AM Best also 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. Concurrently, AM Best has downgraded the FSR to B++ (Good) from A- (Excellent) and the Long-Term ICRs to “bbb+” from “a-” of Union Security Insurance Company (USIC) (headquartered in Kansas City, MO) and Union Security Life Insurance Company of New York (USLICNY) (Fayetteville, NY). The outlook of these ratings have been revised to stable from negative. (See below for a detailed list of the companies and Long- and Short-Term IRs.)
The ratings reflect Assurant’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
The company maintains leadership positions in the delivery of lender-placed homeowners insurance, mobile protection insurance, vehicle service contracts, extended service contracts and credit-related insurance products, and maintains a large 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, has delivered strong earnings over the past five years despite periods of significant catastrophe losses.
Somewhat offsetting these positive ratings factors are the P/C group’s natural catastrophe exposure and its continued dependence on third-party reinsurance. These factors expose the P/C group’s earnings to a degree of variability. However, these concerns are mitigated somewhat by its geographic spread of risk, management’s use of risk management tools — including tracking aggregation of risks — and product design.
Assurant’s domestic and Canada-based preneed companies, American Memorial Life Insurance Company (American Memorial) (Rapid City, SD) and Assurant Life of Canada (ALOC) (Toronto, Canada), are the main entities of Assurant’s Global Preneed business segment. The ratings of American Memorial reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its strong operating performance, favorable business profile and appropriate ERM. American Memorial is one of the largest writers of preneed life insurance in the United States. Its preneed business has experienced favorable premium growth trends over the past five years; however, AM Best notes that American Memorial’s preneed business sales are tied primarily to one core distribution channel, which exposes the segment to concentration risk.
The ratings of ALOC reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its strong operating performance, neutral business profile and appropriate ERM. ALOC is the leading writer in Canada’s preneed market and maintains good geographic diversity within Canada’s provinces. AM Best also notes that distribution is much more diverse within the Canadian operations.
The ratings of Assurant’s credit L/H insurance companies — American Bankers Life Assurance Company of Florida (Miami, FL) and Caribbean American Life Assurance Company (San Juan, PR) — reflect their balance sheet strength, which AM Best categorizes as strong, as well as their strong operating performance, limited business profile and appropriate ERM. Risk-adjusted capital measures are maintained at the strongest levels, driven by consistent net operating gains over the past few years. Assurant is a market leader in credit insurance in Canada and Puerto Rico, where they have maintained relationships with most of the major banks in these two countries; however, its U.S. domestic credit insurance business continues to decline, driven by regulatory changes affecting credit insurance sold through banks and credit cards.
The ratings of USIC and USLICNY reflect their balance sheet strength, which AM Best categorizes as strong, as well as their adequate operating performance, limited business profile and appropriate ERM. The rating downgrades of USIC and USLICNY reflect the diminished business profile assessment and reduced strategic importance for these entities going forward following the sale of its employee benefits business to Sun Life Financial, Inc. (Sun Life) in March 2016. The companies, as part of a transition agreement with Sun Life, continued to write and renew business, and reinsure 100% of the business to Sun Life. A significant majority of the employee benefit business either has been transitioned off these entities’ paper, or is expected to be transitioned in the near term. Additionally, there is a new fronting arrangement on Medicare supplement business, which is not a material driver of revenue or earnings, and run-off preneed insurance liabilities. AM Best will continue to monitor the runoff of the remaining business in these entities for profitability, capital adequacy and the level of implicit and explicit capital support, as well as any changes to the operational and strategic use of these legal entities.
The FSR of A (Excellent) and the Long-Term ICRs of “a+” have been affirmed with stable outlooks for the following P/C 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 stable outlooks for the following L/H subsidiaries of Assurant, Inc.:
- American Memorial Life Insurance Company
- American Bankers Life Assurance Company of Florida
- Caribbean American Life Assurance Company
- Assurant Life of Canada
The FSR was downgraded to B++ (Good) from A- (Excellent), the Long-Term ICRs downgraded to “bbb+” from “a-” and the outlooks revised to stable from negative, for the following L/H subsidiaries of Assurant, Inc.:
- Union Security Insurance Company
- Union Security Life Insurance Company of New York
The following Long-Term IRs have been affirmed with stable outlooks:
-- “bbb+” on USD 300 million 4.90% senior unsecured bonds, due 2028
-- “bbb+” on USD 300 million floating senior unsecured bonds, due 2021
-- “bbb+” on USD 300 million 4.20% senior unsecured bonds, due 2023
-- “bbb+” on USD 350 million 4.00% senior unsecured bonds, due 2023
-- “bbb+” on USD 375 million 6.75% senior unsecured bonds, due 2034
-- “bbb” on USD 400 million 7.00% subordinated bonds, due 2048
-- “bbb-” on USD 288 million 6.50% preferred securities, due 2021
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 outlooks:
-- “bbb+” on senior unsecured
-- “bbb” on subordinated debt
-- “bbb-” on preferred stock
This press release relates to Credit Ratings that have been published on AM 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 AM 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. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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