Following a periodic review, rating agency A.M Best affirmed
) issuer credit ratings ("ICR") at 'bbb'. It also affirmed the
ICR and financial strength ratings ("FSR") of the Property and
Casualty ("P&C") and Life and Health subsidiaries of the
company. All the ratings carry a stable outlook.
A.M. Best acknowledges Assurant's diverse product base and
distribution platform, established presence in various niche
markets, adequate risk-adjusted capitalization, solid operating
earnings, low debt-to-capital ratio and adequate interest
coverage ratio. The company has sufficient financial flexibility
with a low debt ratio of approximately 18% as of September, 30,
2012. Moreover, it has $350 million in a commercial paper program
(100% of which is backed by letters of credit) with no debt
obligations until 2014.
The rating agency affirmed the FSR and the ICR of "A" and "a,"
respectively, on all the seven Property and Casualty companies of
Assurant, backed with a "stable" outlook. It acknowledged the
established presence of the business in the North American
The rating agency stated that the company is a leader in
rolling out credit-related insurance products, creditor placed
hazard insurance, manufactured housing insurance, vehicle service
contracts and retail extended service contracts. A.M. Best
attributed the strong performance and solid operating earnings of
Assurant's P&C business, over the past five years, to its
diverse product line.
The growth in Specialty Property in recent years has nevertheless
increased the segment's exposure to natural catastrophes. Also,
the increase in catastrophe retention limit invites further
earnings risk. Softness in the Property and Casualty markets is
expected to put pressure on premium growth in the near term. The
rating agency, however, said that it will monitor the company's
performance in the face of challenging macroeconomic conditions
and developments in the mortgage servicing industry.
A.M.Best also affirmed the FSR and ICRs of two other companies
that operate within Assurant's Preneed segment - American
Memorial Life Insurance Company (AMLIC) based in Rapid City, SD
and Assurant Life of Canada (ALOC) headquartered in Ontario,
Canada - at "A-" and "a-," respectively, with a
"stable" outlook. The rating agency acknowledges AMLIC's position
as the largest writer of preneed solutions in the United States
and ALOC's strong presence in the Canadian preneed market.
Both the entities have grown profitably displaying strong
premium growth and at the same time maintaining adequate
risk-adjusted capitalization. However, an offsetting factor
to the ratings is the ongoing low interest rate environment,
given the long-duration nature of the business. Since AMLIC gets
all its business from Service Corporation International, there is
a chance of concentration risk.
The affirmation of FSR at "A-" and ICRs at "a-" of Union Security
Insurance Company (USIC) - a company that operates within
Assurant's Employee Benefits segment - with a stable outlook
comes on the back of its niche position in the U.S. group dental,
disability and group life insurance market. The unit primarily
serves businesses with less than 500 employees. A weak job market
and a high unemployment rate have affected the demand for
employee benefits products.
Time Insurance Company (TIC) and John Alden Life Insurance
Company (JALIC), both based in Milwaukee, WI, offer individual
and small group major medical coverages through Assurant Health.
Both these companies also witnessed a rating affirmation - FSR at
"A-" (Excellent) and ICRs at "a-."
The rating agency acknowledged the fact that the uncertainties
pertaining to the implementation of Health Care reform creates a
sense of ambiguity, despite the support from the parent. These
companies have adopted proactive measures such as reducing
expenses, introducing new products and effecting changes in
pricing. The extents, to which these measures succeed in
mitigating the risks, are yet to be seen.
ASSURANT INC (AIZ): Free Stock Analysis
TORCHMARK CORP (TMK): Free Stock Analysis
UNUM GROUP (UNM): Free Stock Analysis Report
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A.M Best provided the ratings based on an annual review of
Assurant's performance. It had also affirmed the FSR and ICR of
the property and casualty and life and health subsidiaries of the
company, with a favorable outlook last year. Considering the
strong operating fundamentals of the company, it can be assumed
that it will gather positive analysis from the rating agency in
the next review.
The rating agency may raise its ratings on Assurant if it
continues to show a strong operating performance and maintains
its strong risk-adjusted capitalization.
However, negative rating actions can not be ruled out in case the
balance sheet strength deteriorates to a level, which is below
the rating agency's minimum requirement for the current ratings.
Assurant, which closely competes with
), retains a Zacks #3 Rank, which translates into a short-term
Hold rating. Considering the fundamentals, we are also
maintaining our long-term Neutral recommendation on the