Ratings Recap: CIFG, Tall Pines, Conn. Medical, Nationwide, Wolverine

Fitch Ratings has downgraded CIFG to ‘AA-‘ from ‘AAA’ and kept the ratings on Rating Watch Negative. The downgrade affects the Insurer Financial Strength (IFS) ratings for CIFG Guaranty and affiliates – CIFG Guaranty; CIFG Assurance North America, Inc.; CIFG Europe. Fitch also indicated that “all obligations insured by CIFG may be affected by this action. Fitch’s policy is to downgrade insured transactions to the higher of the underlying rating of the insured transaction if rated by Fitch or the rating of the insurer.” Fitch also indicated it had taken the action on CIFG Guaranty and its affiliates based on its “view that CIFG’s shareholders may be less willing to provide further capital support to CIFG in the future than in the past.”

A.M. Best Co. has assigned a financial strength rating of ‘B+’ (Good) and an issuer credit rating of “bbb-” to Tall Pines Insurance Company of Burlington, Vermont with a stable outlook. “The ratings are based on Tall Pines’ good capitalization levels, its quality management team with numerous years of industry experience and its strong risk management program. Partially offsetting these positive rating factors are the company’s high expense ratio and its narrow business scope as a single parent captive with limited stand alone financial flexibility. Tall Pines’ parent, Valhi Inc. has the capacity to support the captive’ s capital position and has access to external capital.

A.M. Best Co. has upgraded the financial strength rating (FSR) to ‘A-‘ (Excellent) from ‘B++’ (Good) and assigned an issuer credit rating (ICR) of “a-” to Connecticut Medical Insurance Company (CMIC). Best also revised the outlook on the FSR to stable from positive. The outlook on the ICR is also stable. “The ratings reflect CMIC’ s improved risk-adjusted capitalization and underwriting performance, its favorable return measures and conservative loss reserving philosophy,” Best explained. “Management’s actions to achieve rate adequacy, improve its book of business and build conservatism in its loss reserves has resulted in the generation of operating profitability and a strengthened capital position.”

Standard & Poor’s Ratings Services has placed its ratings on Nationwide Financial Services Inc. (NFS), its subsidiaries, and related securities on CreditWatch with negative implications [See also following announcement]. These actions follow the announcement of Nationwide Mutual Insurance Co.’s (NMIC) offer to acquire all outstanding shares of NFS common stock that it does not already own. “The ‘A+’ financial strength and counterparty credit ratings on NMIC are one notch lower than the ‘AA-‘ financial strength and counterparty credit ratings on the core life insurance operating companies of NFS, including Nationwide Life Insurance Co., Nationwide Life & Annuity Insurance Co., Nationwide Life Insurance Co. of America, and Nationwide Life & Annuity Co. of America,” S&P explained. “The rating actions reflect the lower financial strength ratings of the acquirer, as well as uncertainty regarding the potential effect on capitalization of NFS and its subsidiaries, whose capitalization are currently viewed as very strong,” added S&P credit analyst Matt Carroll.

In a bulletin related to the previous announcement Standard & Poor’s Ratings Services affirmed its ‘A+’ counterparty credit and financial strength ratings on the companies of the Nationwide Mutual Intercompany Pool with a stable outlook. “The affirmation follows the announcement by Nationwide that it has extended an offer to (NFS) to acquire the outstanding public shares that it does not already own for $2.2 billion in cash,” noted S&P credit analyst Neil Stein. Presently, Nationwide, through intermediate holding company Nationwide Corp., owns about 66 percent of the economic interest and about 95 percent voting interest in NFS.

A.M. Best Co. has downgraded the financial strength rating (FSR) to ‘B++’ (Good) from ‘A-‘ (Excellent) and has assigned an issuer credit rating (ICR) of “bbb+” to Michigan-based Wolverine Mutual Insurance Company. Best also revised the outlook for the FSR to stable from negative. The outlook assigned to the ICR is negative, “driven by Wolverine’s suppressed earnings and continued sub-industry performance,” said Best. “The ratings reflect Wolverine’s favorable gross underwriting performance, its well-established market presence in Michigan and Indiana and its improving investment performance,” the bulletin continued. However Best noted that “the company’s marginal capital position, driven by above average leverage ratios and below average net operating performance in comparison to its industry composite” is an offsetting factor. Wolverine writes primarily property coverage and is exposed to wind and hail risks.