MOODY'S REVIEWS RATINGS OF CERTAIN INSURERS AND REINSURERS WITH EXPOSURE TO RECENT TERRORIST ATTACKS
New York, September 24, 2001 -- In the wake of the terrorist attacks occurring on September 11,
Moody's Investors Service has initiated rating reviews for possible
downgrade of a number of insurance enterprises. Moody's has
also changed its outlooks for the ratings of a number of other insurers.
While the losses reported to-date by rated insurers do not pose
a threat to solvency, the magnitude of expected claims is significant
and has not generally been factored into existing ratings.
Although each firm's situation is unique, Moody's has
identified a number of concerns that are common to each, and that
will be subject to further consideration and analysis during the review
process. These common concerns are:
1) The magnitude of actual losses reported, both gross and net,
relative to capitalization, fixed charges, cash flows,
and core earnings.
2) The degree of uncertainty surrounding current estimates of loss,
including the prospect for disputes about the extent to which reinsurance
will respond.
3) The extent to which, following the recent attacks, the
profile of risk within the insurance industry has changed, at least
for some period of time.
Moody's initiates rating reviews in situations where current information
suggests that the existing rating may be inappropriate, and where
additional information and analysis is expected to be helpful in reaching
a definitive conclusion. In the current situation, it is
possible that the relevant uncertainties will take a long time to become
resolved. However, the range of uncertainty will probably
be materially reduced over the next few months. Moody's expects
to conclude its reviews in this time frame.
To the extent that the actual damages from these events are consistent
with initial estimates, Moody's expects that the rating reviews
would typically conclude with either a confirmation or a one notch downgrade.
Rating downgrades of two or more notches are quite unlikely except in
cases where actual losses are significantly higher than current estimates
or other adverse trends or events become manifest.
In individual cases, the rating reviews may also focus on issues
other than the ones mentioned above. One example of such an issue
would be the adequacy of loss reserves, in the context of Moody's
annual loss reserve assessment, which is now complete. Another
issue to be considered in certain cases is the extent to which a firm's
future business opportunities
may be constrained by its relatively modest size, given the possibility
that the magnitude of these expected losses could lead some insurance
buyers to direct their business to the largest players. The specifics
of each rating review will be outlined in separate press releases following
this one.
For some insurers, Moody's believes that losses from the terrorist
attacks have put pressure on the company's financial strength,
but not to the extent that an immediate rating review is warranted.
This may be true either because the size of the loss for that company
is not expected to be severe or because the firm is supported by affiliates,
either implicitly or
explicitly. In these cases, Moody's has elected to
change its rating outlook to signal to counterparties and investors how
that rating could trend over the medium term. The specifics of
these changes in rating outlook will also be outlined in separate press
releases.
Moody's has placed the insurance financial strength and long-term
debt ratings of the following groups (including rated subsidiaries) under
review for possible downgrade, except as qualified below:
ACE Limited (senior unsecured debt at A2; rating for commercial paper
at Prime-1), review includes ACE Guaranty Re (insurance financial
strength at Aa2), excludes ACE USA insurance financial strength
ratings;
American Re-Insurance Company (insurance financial strength at
Aaa, senior unsecured debt at Aa1);
Chubb Corporation (insurance financial strength at Aa1, senior unsecured
debt at Aa3);
Copenhagen Reinsurance Company Limited (insurance financial strength at
A3);
Hartford Financial Services Group, Inc. and Hartford Life,
Inc. (senior unsecured debt at A2; rating for commercial paper
at Prime-1); review excludes financial strength ratings of
rated affiliated property/casualty and life insurance companies;
Liberty Mutual Group (insurance financial strength at Aa3, surplus
notes at A2, rating for commercial paper at Prime-1);
review includes Liberty Financial Companies' debt ratings, but excludes
insurance financial strength ratings of rated affiliated life insurance
companies;
Lloyd's Syndicate #2488 (ACE) - insurance financial strength
at Aa2;
Lloyd's Syndicate #2020 (Wellington) - insurance financial
strength at Aa3;
Lloyd's Syndicate #2001 (Amlin) - insurance financial strength
at A1;
Markel Corporation (insurance financial strength at A3, senior unsecured
debt at Baa3);
Munich Reinsurance Company (insurance financial strength at Aaa);
PartnerRe Ltd. (insurance financial strength at Aa3, preferred
stock at A3);
PMA Capital Insurance Company (insurance financial strength at A3);
PXRE Group Ltd. (insurance financial strength at Baa1, trust
preferred securities at Ba1);
Royal & Sun Alliance Insurance Group plc (insurance financial strength
at Aa3, subordinated at A2); Codan Insurance Company Limited
(insurance financial strength at A1); review excludes insurance financial
strength ratings of rated US-based subsidiaries;
St. Paul Companies and St. Paul Reinsurance Company Ltd.
- insurance financial strength at Aa2, senior unsecured debt
at A1; review excludes insurance financial strength ratings of affiliated
life insurance companies;
Swiss Reinsurance Company (insurance financial strength at Aaa,
senior unsecured debt at Aaa);
Trenwick Group Ltd. (insurance financial strength at A3,
senior unsecured debt at Baa3);
XL Capital Ltd (insurance financial strength at Aa2, senior unsecured
debt at A1);
Zurich Capital Markets Group (counterparty ratings at Aa1; preferred
stock and MTNs at Aa2 and Aa3.
Zurich Insurance Company and guaranteed subsidiaries (insurance financial
strength at Aa1, senior unsecured debt at Aa3); review excludes
rated members of the Farmers Insurance Group, Centre Solutions Group,
and Zurich Kemper Life companies.
Ratings on the following entities are already on review for possible downgrade,
and will now consider - in addition to other issues - exposure
to losses from the terrorist attack:
CNA (Continental Casualty Company insurance financial strength at A2;
senior unsecured debt at Baa1);
Hannover Reinsurance Company (insurance financial strength at Aa3);
Legion Insurance Group (insurance financial strength at A3);
Lloyd's Syndicates #1007 and #1212 (SVB) - insurance financial
strength at Aa3 and A1, respectively;
Zurich Reinsurance North America (to be renamed Converium Re) -
insurance financial strength at Aa3, senior unsecured debt at A1.
The following ratings outlooks have been changed:
Employers Reinsurance Group (including GE Re, ERC Frankona Re) -
insurance financial strength at Aaa, to negative from stable;
General Reinsurance Group (including GeneralCologne Re) - insurance
financial strength at Aaa, to negative from stable;
Kemper National Insurance Companies (insurance financial strength at A2,
to negative from stable);
Odyssey Reinsurance Group (insurance financial strength at Baa1,
to stable from positive).
SCOR (insurance financial strength at A1, to stable from positive);
Sirius (insurance financial strength at A1, to stable from positive).
In some cases, certain of the companies referred to above may provide
support, in the form of credit enhancement, to securities
that are not direct obligations of these firms. Moody's is in the
process of identifying and evaluating these securities and will comment
on possible rating implications for those securities over the next few
days.
Moody's will host a teleconference discussing these developments for the
benefit of our research subscribers, on Friday September 28,
at 10:00am Eastern Daylight Time. For further information,
please call your Moody's Customer Service representative at 215-967-6233.
New York
Ted Collins
Managing Director
P&C Insurance and Reinsurance
Moody's Investors Service
JOURNALISTS: (215) 967-6233
SUBSCRIBERS: (215) 967-6233
New York
Mark Hewlett
Managing Director
European Insurance & Lloyd's
Moody's Investors Service
JOURNALISTS: (215) 967-6233
SUBSCRIBERS: (215) 967-6233