A.M. Best Affirms Ratings of Subsidiaries of Aon Corporation; Maintains Negative Outlook on Certain Subsidiaries.
Additionally, A.M. Best has affirmed the FSR of B++ (Very Good) of Resource Life Insurance Company (Resource). The rating outlook is stable. Concurrently, A.M. Best has assigned various issuer credit ratings (ICR) to all the above companies. All companies are domiciled in Glenview, IL, except where specified. (See below for a detailed listing of the ratings.)
In May 2004, A.M. Best assigned a negative outlook to CICA based on concerns surrounding the level of concentration associated with a number of CICA's less liquid high-risk assets; uncertainty with regards to parental support for the organization; and ongoing operational and business profile issues. Over the past year, the group has made considerable progress in reducing the concentrations in its invested asset portfolio. A.M. Best is pleased with the improvements that the group has made in its investment quality and reduction of less liquid holdings.
However, the negative outlook primarily reflects concerns surrounding difficulties recently encountered by Aon. Previously, A.M. Best noted that given Aon's aborted divestiture of its insurance operations in 2002, A.M. Best did not view the insurance operations as core to the organization. Given recent concerns about uncertainties related to the execution of Aon's revised business strategy--specifically the replacement of revenue and earnings lost from contingent commissions--the Aon ownership in CICA is currently looked upon negatively by A.M. Best.
While capitalization has not been an issue for CICA, Aon continues to take sizeable dividends from CICA. Plans call for additional dividends to be paid from CICA in coming years. A.M. Best remains concerned that Aon could begin to rely on its insurance operations as a larger source of support in the near term as it implements its revised business strategy.
The negative outlook for Sterling is tied to its close organizational relationship with CICA, as well as continued concerns about its Medicare supplement and Medicare Advantage markets, which are highly-regulated, commodity-type products facing increasing competition. While Sterling has reported profits in each of the past two years, A.M. Best will be monitoring its ability to continue this trend, especially in light of the recently reported considerable growth.
The rating of Resource reflects its strategic relationship with Virginia Surety, the group's extended warranty insurance company. Resource markets credit life and disability products.
Virginia Surety's rating reflects its secure risk-adjusted capitalization, specialty niche underwriting expertise in the extended service/warranty segment and the return to profitability in 2004 furthered by the suspension of stockholder dividends. These factors are offset by the company's poor underwriting and operating results posted in 2002 and 2003, the uncertainty regarding future loss reserve development and the recent change in business mix, which currently reveals workers' compensation as Virginia Surety's leading line of business (based on direct premiums written). This rating also applies to FFG.
The financial strength ratings of A (Excellent) have been affirmed and issuer credit ratings of "a" have been assigned to the following subsidiaries of Aon Corporation:
--Combined Insurance Company of America
--Combined Life Insurance Company of New York
The financial strength rating of A- (Excellent) has been affirmed and issuer credit ratings of "a-" have been assigned to the following subsidiaries of Aon Corporation:
--Virginia Surety Company
--FFG Insurance Company
The financial strength rating of A- (Excellent) has been affirmed and an issuer credit rating of "a-" has been assigned to Sterling Life Insurance Company, a subsidiary of Aon Corporation.
The financial strength rating of B++ (Very Good) has been affirmed and an issuer credit rating of "bbb" has been assigned to Resource Life Insurance Company, a subsidiary of Aon Corporation.
For Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.