Outlook for six insurance groups revised

S&P has affirmed their ‘AA+’ rating with a ‘negative’ outlook for Guardian Life Insurance Co. of America and its subsidiaries. S&P is concerned that the forward looking view of management and their initiatives to improve diversification and manage expense efficiency may not come to fruition.

S&P warned of a possible lower rating for Western and Southern Life Insurance Co. if one or all of the following happen:

• A continued shift toward spread-based annuity products as measured by their percentage of total reserves;
• If a majority of their earnings are derived from annuities; or
• If their capitalization somehow drops to a level that no longer supports their risk profile.

Core subsidiaries of Berkshire Hathaway Inc. also remained ‘negative’ although S&P cautioned this was unrelated to its revised U.S. outlook. S&P’s ratings of Berkshire Hathaway were conducted under new methodology for insurers, published on May 16 of this year. A downgrade is possible if capital adequacy, according to S&P’s capital model, of Berkshire Hathaway’s insurance operations deteriorates as a result of an increased investment risk exposure or the funding of a large acquisition by the insurance companies.

S&P cautioned that Western and Southern was not assessed under the new methodology out on May 16, and “it remains under criteria observation.”