WASHINGTON BUREAU — The large mutual life insurers that lost AAA ratings from Standard & Poor’s Ratings Services Monday say the changes have nothing whatsoever to do with their own operations.
Standard & Poor’s, New York, cut the mutual insurers’ prized AAA ratings to AA plus based solely on the principle that U.S. insurers can’t have stronger ratings than the U.S. government, the companies say.
Moody’s Investors Service, New York, and Fitch Ratings, New York, have not cut their ratings on the U.S. government, and executives at New York Life Insurance Company, New York, have pointed out that they have not downgraded the top-ranked U.S. insurers.
“We disagree with S&P’s view that AAA-rated insurers should be adjusted in lockstep with the U.S. Treasury,” New York Life spokesman William Werfelman says.
Both Moody’s and Fitch “are of the opinion that financial institutions can have a higher rating than the federal government, and we agree with their assessment,” Werfelman says.
S&P itself praised the financial profiles and business profiles of the mutual insurers affected by the downgrade of the U.S. government.
In addition to New York Life, the life companies affected were the Knights of Columbus, New Haven, Conn.; Northwestern Mutual Life Insurance Company, Milwaukee; and Teachers Insurance & Annuity Association of America, New York.
Werfelman notes that, for U.S. insurers, AA plus is now the top S&P rating.
“Even with this action by S&P, New York Life still has the highest-possible rating from S&P of any financial institution, and remains one of only three life insurers with the highest ratings from all four major rating agencies,” he says.
The Supreme Knight at the Knights of Columbus has expressed a similar sentiment.
“Today’s action by S&P does not reflect in any way on the business operations or performance of the Knights of Columbus,” the Supreme Knight said Monday.
The Supreme Knight noted that S&P took note of the Knights of Columbus’s strong affinity relationships with policyholders.
Northwestern Mutual said in its statement that has been no change in its financial fundamentals.
“The change in rating by S&P doesn’t alter our conviction that no life insurer is stronger than Northwestern Mutual or provides better long-term or product value,” Northwestern Mutual says. “It doesn’t change the fact that we pay more dividends than any competitor…. Uncertain economic conditions continue to play to Northwestern Mutual’s greatest strengths. Consumers continue to focus on managing risk, dealing with financially strong companies and working with trusted advisors who can guide them through the emotion and uncertainty of the times.”
Other federal budget coverage from National Underwriter Life & Health:
- U.S. Rating Downgrade: Analysts Shrug
- Obama Administration: Super Committee Can Raise Taxes, Cut Entitlements
- Budget Bill Excludes “Tax Expenditure” Provisions
- Moody’s Places U.S. Aaa Government Bond Rating and Related Ratings on Review for Possible Downgrade
- Rating Agencies Eye U.S. Government, Japanese Life Insurers