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Related Issuers
Aegon USA Life Group (Cons)
American Enterprise Life Insurance Company
American Investors Life Insurance Company
Athene Annuity and Life Assurance Company
Aviva Life & Annuity Company
Aviva USA Corporation
Colonial Life & Accident Insurance Company
Commonwealth Annuity and Life Insurance Co.
Delta Life and Annuity Company
First Allmerica Financial Life Insurance Co.
First UNUM Life Insurance Company
General American Life Insurance Company
Guardian Insurance & Annuity Company, Inc.
Guardian Life Insurance Company of America
Hanover Insurance Group, Inc (The)
Horace Mann Life Insurance Company
Indianapolis Life Insurance Company
John Hancock Canadian Corporation
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John Hancock Capital Trust II
John Hancock Financial Services, Inc.
John Hancock Global Funding II
John Hancock Life Insurance Company
John Hancock Variable Life Insurance Company
Life Investors Insurance Co. of America
Manulife Insurance Company
MetLife Investors Insurance Company
MetLife, Inc.
Metropolitan Life Global Funding I
Metropolitan Life Insurance Company
Monumental Global Funding II
Monumental Global Funding Limited
MONY Group Inc. (The)
MONY Life Insurance Company
MONY Life Insurance Company of America
New England Life Insurance Company
Pacific Life & Annuity Company
Pacific Life Funding, LLC
Pacific Life Insurance Company
Paul Revere Life Insurance Company
Peoples Benefit Life Insurance Company
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Phoenix Life Insurance Company
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Presidential Life Corporation
Principal Financial Global Funding, LLC
Principal Financial Services, Inc.
Principal Life Global Funding I
Principal Life Insurance Company
Provident Life and Accident Insurance Co.
RiverSource Life Insurance Co. of N Y
RiverSource Life Insurance Company
Security Benefit Life Insurance Company
Stonebridge Life Insurance Company
Structured Asset Repackaged Trust, Ser.2001-3
Structured Asset Repackaged Trust, Ser.2001-4
Transamerica Financial Life Insurance Company
Transamerica Life Insurance and Annuity Co.
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Rating Action:

MOODY'S CHANGES RATING OUTLOOK FOR THE U.S. LIFE INSURANCE INDUSTRY TO NEGATIVE FROM STABLE

06 Sep 2002
MOODY'S CHANGES RATING OUTLOOK FOR THE U.S. LIFE INSURANCE INDUSTRY TO NEGATIVE FROM STABLE

Several Groups' Ratings and Outlooks Affected

New York, September 06, 2002 -- Moody's Investors Service has changed its outlook for the US life insurance industry to negative from stable based on the existence of several negative trends and credit issues facing the sector. The rating agency has also placed a number of companies on review for possible downgrade and changed the outlooks on several other companies.

Moody's will continue to monitor the industry and will take additional rating and outlook actions as necessary. The rating agency's updated views on the US life industry will be available early next week in a new report titled: "Moody's Changes Outlook for U.S. Life Insurance Industry to Negative".

"The current environment is an especially harsh one for the life insurance industry, with pressure on its earnings capacity and capital," says Robert Riegel, Moody's managing director for life & health insurance. "Credit losses from companies' investment portfolios and the impact of depressed stock markets on equity-based products and businesses, combined with management actions to improve GAAP earnings and shareholder returns, could put further strain on the industry's creditworthiness and financial flexibility," Riegel says.

Riegel emphasizes that the industry maintains many significant strengths supporting its high average ratings (average financial strength rating at Aa3/A1) including well diversified and high quality investments as well as solid capital and liquidity, and that some of the negative trends may dissipate and reverse. However, Moody's believes that the uncertainty surrounding many of these credit issues warrants a number of rating reviews and outlook changes at this time.

If the negative trends continue or worsen, Moody's believes some companies' ratings may have to be adjusted modestly downward as the current ratings do not incorporate the diminished levels of earnings and capital formation that are likely under a negative scenario.

"The increased frequency of bond defaults, problem credits, and rating downgrades despite good portfolio diversification has placed pressure on investment portfolio performance, with investment losses eroding a significant portion of some company's core earnings," Riegel cautions. "The combination of an uncertain economic environment with heightened credit concerns about many large issuers of corporate debt in the telecommunications and energy trading sectors indicates that investment losses for insurers are likely to remain at elevated levels over the near-term.

The rating agency adds that the impact of the depressed stock market on equity-based products, primarily variable annuities, will continue to be a drag on companies' earnings. Riegel warns that "not only will earnings fall as the amount of assets under management declines, but additional charges to earnings and capital are increasingly likely. This is because of reserve requirements for annuity secondary guarantees, particularly on guaranteed death benefits, and the accelerated amortization, or write-off, of GAAP deferred acquisition costs due to recoverability issues".

Moody's has focused on both the liquidity and spread compression risks inherent in life insurers' institutional investment product business for the past few years. The rating agency believes, however, that these risks are heightened in today's environment of higher credit losses and the greater potential for market turmoil. These facts add to the uncertainty involved with funding new business and liquidating large amounts of investments over a short time period.

Moody's also believes that there is an increasing divergence in the credit profile and ratings of stock versus mutual life insurers, especially in the case of recently demutualized companies.

"Stockholder demands for earnings growth and higher returns on equity are causing companies to redeploy capital, increase their use of debt, and return excess capital to shareholders through share repurchase programs-actions which tend to reduce the insurer's capital cushion, flexibility, and overall creditworthiness," Riegel says.

The vast majority of the rating actions announced today and in recent weeks affect stock companies.

Moody's cautions, however, that the exposure of life insurers to these heightened risks must be evaluated on a company-specific basis, and should include an analysis of its mix of business, earnings capacity, capital adequacy, use of financial leverage, and organizational structure (e.g. stock or mutual). Riegel explains that investment losses will be of less consequence, and less concerning to Moody's, if the company writes primarily participating whole life business and has limited financial leverage as compared to an insurer that sells primarily institutional investment products and carries significant debt in its capital structure.

It is still possible that the negative trends in credit losses and equity markets could reverse in the near term, but it is Moody's view that there will be little improvement in the coming months. Earnings and capital formation are likely to be constrained for the near term, Moody's believes, heightening the credit risks for both the policyholders and creditors of US life insurance companies.

RATING ACTIONS

The ratings of the following groups were placed under review for possible downgrade:

John Hancock Financial Services Inc.-A2 senior debt; Prime-1 commercial paper

Investors Partner Life Insurance Co-Aa2 insurance financial strength (IFSR)

John Hancock Life Insurance Company-Aa2 IFSR; Aa3 senior debt; A1 surplus notes

John Hancock Global Funding II-Aa2 backed debt

John Hancock Variable Life Insurance Co-Aa2 IFSR

Phoenix Companies Inc.-A3 senior debt

Phoenix Life Insurance Company-Aa3 IFSR; A2 surplus notes

The following rating outlooks were changed to negative from stable:

American Enterprise Life Insurance Co-Aa3 IFSR

IDS Life insurance Co-Aa3 IFSR

IDS Life Insurance Co of New York-Aa3 IFSR

AmerUs Group Co--Baa3 senior debt

AmerUs Life Insurance Company-A3 IFSR

American Investors Life Insurance Co-A3 IFSR

Delta Life & Annuity Co-A3 IFSR

Indianapolis Life Insurance Co-A3 IFSR; Baa2 surplus notes

Guardian Life Insurance Company of America-Aa1 IFSR

Guardian Insurance & Annuity Co Inc.-Aa1 IFSR

MetLife Inc.-A2 senior debt; Prime-1 commercial paper

General American Life Insurance Co-Aa2 IFSR

Metropolitan Life Insurance Company-Aa2 IFSR

Metropolitan Life Global Funding I-Aa2 backed debt

MetLife Investors Insurance Co-Aa2 IFSR

New England Life Insurance Co-Aa2 IFSR

Structured Asset Repackaged Trust Series 2001-3 & 2001-4--Aa2 backed debt

MONY Group, Inc.-Baa2 senior debt; Prime-2 commercial paper

MONY Life Insurance Company-A2 IFSR

MONY Life Insurance Co of America-A2 IFSR

Presidential Life Corp.--Ba1 senior debt

Presidential Life Insurance Company-Baa1 IFSR

The rating outlooks were changed to stable from positive:

Pacific Life Insurance Company-Aa3 IFSR; A2 surplus note

Pacific Life Life & Annuity Co-Aa3 IFSR

Pacific Life Funding LLC-Aa3 backed debt

Security Benefit Life Company-A2 IFSR; Baa1 surplus note

The following rating actions and outlook changes had previously been announced by Moody's:

Aegon USA Life Insurance Group

AUSA Life Insurance Co, Inc.-changed outlook on Aa3 IFSR to stable from positive on 7/23/02

Stonebridge Life Insurance Co-changed outlook on Aa3 IFSR to stable from positive on 7/23/02

Life Investors Insurance Co of America-changed outlook on Aa3 IFSR to stable from positive on 7/23/02

Monumental Life Insurance Co-changed outlook on Aa3 IFSR to stable from positive on 7/23/02

Monumental Global Funding Ltd-changed outlook on Aa3 backed debt to stable from positive on 7/23/02

Monumental Global Funding II-changed outlook on Aa3 backed debt to stable from positive on 7/23/02

Peoples Benefit Life insurance Co-changed outlook on Aa3 IFSR to stable from positive on 7/23/02

Transamerica Life Insurance & Annuity Co-changed outlook on Aa3 IFSR to stable from positive on 7/23/02

Transamerica Life Insurance Co-changed outlook on Aa3 IFSR to stable from positive on 7/23/02

Transamerica Occidental Life Insurance Co-changed outlook on Aa3 IFSR to stable from positive on 7/23/02

Western Reserve Life Assurance Co of Ohio-changed outlook on Aa3 IFSR to stable from positive on 7/23/02

Allmerica Financial Corp-downgraded to Baa2 senior debt on 7/22/02

Allmerica Financial Life & Annuity Co-downgraded to A3 IFSR on 7/22/02

First Allmerica Financial Life Insurance Co-downgraded to A3 IFSR on 7/22/02

Premium Asset Trust Series 1999-1; 2000-4--downgraded to A3 backed debt on 7/22/02

Horace Mann Life Insurance Co-outlook on A2 IFSR was changed to negative from stable on 7/25/02

Principal Financial Services Inc.-review for downgrade on 8/26/02: guaranteed A2 senior debt; Prime-1commercial paper

Principal Life Insurance Company-review for downgrade on 8/26/02: Aa2 IFSR; A1 surplus notes

Principal Financial Global Funding LLC-review for downgrade on 8/26/02: Aa2 backed debt

Principal Life Global Funding I--review for downgrade on 8/26/02: Aa2 backed debt

UnumProvident Inc.-review for downgrade on 8/23/02: Baa2 senior debt; Prime-2 commerical paper

Colonial Life & Accident Insurance Co-review for downgrade on 8/23/02: A2 IFSR

First UNUM Life Insurance Co-review for possible downgrade on 8/23/02-A2 IFSR

Paul Revere Life Insurance Co-- review for possible downgrade on 8/23/02-A2 IFSR

Paul Revere Variable Annuity Ins Co-- review for possible downgrade on 8/23/02-A2 IFSR

Provident Life & Accident Insurance Co-review for possible downgrade on 8/23/02-A2 IFSR

UNUM Life Insurance of America-- review for downgrade on 8/23/02: A2 IFSR

NOTE TO JOURNALISTS: For a copy of this report, please contact New York Press Information +1-212-553-0376; London Press Information +44-20-7772-5454; David Frohriep in Paris +33-1-5330-1062; Juan Pablo Soriano in Madrid +34-91-310-1454; Michael Buneman in Milan +39-0258-215-599; Anita Poppi in Sydney +612-9270-8190; Juergen Berblinger in Frankfurt +49-69-707-30-700; Tokyo Press Information +813-5408-4110; Hilary Parkes in Toronto +1-416-214-1635; Lorraine Yee in Hong Kong +852-2916-1112; Luiz Tess in São Paulo +55-11-3443-7473; or Benito Solis in Mexico City +525-261-8784. Clients may also visit our website at www.moodys.com

New York
Robert Riegel
Managing Director
Life Insurance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Patrick Finnegan
Senior Vice President
Life Insurance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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