Ratings Roundup

The following are ratings that were issued for during the week of April 19 by Moody’s Investors Service and Standard & Poor’s Corp., both in New York.

AFLAC Inc.’s ‘A-‘ counterparty credit rating as well as the ‘AA-‘ counterparty credit and financial strength ratings of its insurance operations have been affirmed by S&P. They have also been removed from CreditWatch with negative implications, although the outlook on all companies remains ‘negative,’ S&P added.
The action was made after incorporating current ratings on hybrid securities into an analysis of AFLAC’s capitalization and applying stress tests to other asset classes to determine that it can maintain a level of statutory capital that supports existing ratings. The rating also reflects the AFLAC’s ability to generate over $2 billion annually. However, S&P also noted concern over the weakening credit quality of AFLAC’s hybrid security portfolio as well as sluggish sales in 2009.

Montpelier Re’s ‘Baa 1’ insurance financial strength rating and the ‘Baa3’ senior debt rating of its parent Montpelier Re Holdings Ltd., have been affirmed by Moody’s. The rating agency also changed the outlook to ‘positive’ to ‘stable’ reflecting enhanced risk management practices over the past several years.
“Montpelier's ratings reflect the company's strategic focus in catastrophe reinsurance, its meaningful capital base, moderate financial leverage, efficient operations, and proprietary enterprise risk management systems,” according to Moody’s. However, the rating agency also cited risks including a “these core strengths are tempered by the inherent volatility of the property catastrophe book and greater model risk in certain specialty classes of business” as well as the potential for execution risk given the company's meaningful expansion into the U.S. specialty market, and the potential for volatility arising from this business which is also subject to model error.”

Unitedhealth Group continues to receive a ‘buy’ recommendation from S&P. The company’ $0.81 EPS in first quarter beat S&P’s estimate by $0.14 and operating revenue rose by 9.1% compared with a 4.5% forecast due to more public and senior members than S&P said that it had expected.
XL Capital Ltd. has been assigned a ‘buy’ rating up from ‘hold’ by S&P. The rating agency said that the company’s shares appear to be fairly valued at 0.54x year-end 2008 tangible book value.