Recently, A.M. Best Co. affirmed the credit ratings of various subsidiaries of Aegon N.V. (AEG). The rating agency affirmed the financial strength rating (:FSR) and issuer credit ratings (:ICR) of Aegon USA Group at “A+” and “aa-,“ respectively. Aegon USA Group refers to all the American life and health subsidiaries of Aegon.
A.M. Best also affirmed the “aa-” debt rating on the outstanding notes of Monumental Life Insurance Company, a part of the Aegon USA Group. Further, the rating agency affirmed the FSR and ICR of the property and casualty insurance subsidiary – Stonebridge Casualty Insurance Company – at “A” and “aa-,” respectively.
Additionally, A.M. Best affirmed the FSR and ICR of a wholly-owned subsidiary Transamerica Life Canada at “A-“ and “a-,“ respectively, and those of Canadian Premier Life Insurance Company – a subsidiary of Transamerica Life Canada – at “A” and “a,” respectively. All the above-mentioned ratings carry a stable outlook.
Further, the financial strength of the holding company and the financial support provided to the subsidiary, along with the strong credit ratings and importance of the subsidiaries also contributed to the affirmation.
The strong earnings and risk-adjusted capitalization of the subsidiaries led to the rating affirmation. The company’s strong foothold in various life and annuity markets, widespread distribution platform with multiple channels, diversified earnings stream, sturdy cash flow, economies of scale, well-recognized brand name and efficient management of balance sheet and liquidity position also contributed to the affirmation.
However, A.M. Best foresees the probability of significant credit losses in Aegon USA Group’s general account investment portfolio. Moreover, the group is significantly exposed to capital market volatility, which could affect fee income and reserve requirement.
The stable outlook on the ratings is based on expectation of continued profitability, anticipation of revenue and profit generation from recent partnerships and maintenance of the current capitalization level. However, a long-term trend of decline on capitalization, below-expectation operating profitability or a fall in the creditworthiness of Aegon could lead to a downgrade in ratings.
Other multi-line insurers worth considering are CNO Financial Group Inc. (CNO) – Zacks Rank #1 (Strong Buy), Eastern Insurance (EIHI) – Zacks Rank #1 (Strong Buy) and Cigna Corp. (CI) – Zacks Rank #2 (Buy).
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