Posts tagged "endowmentinsurance"

Willis Announces Accountable Care Organization Insurance Liability Policy


Directors & Officers liability
Managed Care Operations liability
Medical Professional liability
General liability
Third Party Privacy Protection and First Party Privacy Protection
Fiduciary liability
Billing Errors & Omissions liability option

Additional coverage features include a broad definition of insured, coverage for ACO managed care/claims administration services, and affirmation of the policy as primary for the ACO regardless of the existence of other insurance. The program also includes protection against antitrust and regulatory issues.

This Willis product delivers a range of coverage options including coverage for:

Privacy Issues
Regulatory Risks
Vicarious Liability
Employment Issues
IT Network Development
Group Billing Challenges
Capital Investment Needs
Legal challenges created by interplay of State and Federal Laws
Distribution of Shared Savings and/or Loss Payments to stakeholders

Because these new exposures will be shared among multiple stakeholders, reliance on contractual arrangements and traditional insurance and risk management programs maintained by the individual stakeholders fall short of providing the necessary asset protection for these new structures. As an example, most risk management programs for health care organizations and physicians do not customarily include coverage for health care administration services such as claims administration, selection and de-selection of providers and/or distribution of payments to providers. In addition, the direct and/or vicarious liability created by the acts of the entity also creates coverage issues for individual stakeholders in their individual insurance and risk management programs.

While adoption of this model will vary in execution, forming an ACO will bring together affiliated and non-affiliated stakeholders in a variety of structures creating new risks and insurance challenges for health care organizations. Participants or owners of an ACO could face increased exposures in the form of:

ACO’s have landed squarely at the center of the health care discussion and many health care organizations are planning to form ACOs, defined as networks of health care providers that band together to provide the full continuum of health care services for patients. This model employs various payment methodologies to reward health care organizations such as hospitals, physicians and payors based upon the delivery of high-quality care to improve health outcomes while slowing growth in expenses.
Willis has introduced the Accountable Care Organization Liability insurance policy to address the health care industry’s move to adapt health care delivery models following the Patient Protection and Affordable Care Act of 2010. This product, developed in conjunction with IronHealth, a unit of Ironshore, offers coverage for stand-alone Accountable Care Organizations (ACO) addressing the risks and insurable liabilities associated with forming an ACO.

Posted by insurance - October 13, 2018 at 10:16 am

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Insurance Claims Firm Cunningham Lindsey Put Up for Sale





Stone Point has raised and managed five private equity funds – the Trident Funds – with combined committed capital of $9 billion.

Cunningham Lindsey’s services include claims adjusting, appraisal and claims and risk management for property and casualty insurance losses. Its customers include insurance and reinsurance companies, insurance syndicates, insurance brokers and multinational corporations.

Sources said Cunningham had an EBITDA of around $120 million, which at a multiple of 10 times would value the company at more than $1 billion.

In January last year, Cunningham Lindsey bought the U.S. loss-adjusting business of GAB Robins North America Inc. It did not disclose the terms of the deal.

It owned 43.2 percent of the company as of the end of 2011, with a fair value of about $230 million. Cunningham Lindsey’s senior managers have invested about $10 million in the company.

LARGE RETURNS

Stone Point bought a controlling stake in Cunningham Lindsey from Fairfax in December 2007 through its fourth private equity fund — Trident IV — paying about C$88 million for a 51 percent interest.

Private equity has often been stuck holding on to investments longer than it had hoped as markets have roiled both their traditional ways to exit investments — initial public offerings and outright sales.

These sale plans also come as private equity firms seize opportunities across all sectors of the economy as markets thaw again after what has been an exceptionally volatile period since the financial crisis of 2008.

Shares of private equity-backed Guidewire Software Inc., a provider of software to property and casualty insurers, soared 32 percent in their debut on the New York Stock Exchange in January.

AmWINS Group Inc., the largest wholesale insurance broker in the United States measured by premiums placed, is also on the block. The company’s owners have put most of the company up for sale, expecting about $1.5 billion, three people familiar with the matter said earlier this month.

The deal valued the company at about nine times projected earnings before interest, taxes, depreciation and amortization (EBITDA) and 1.8 times projected revenue.

Last month, BB&T Corp. said it would buy the life, property and casualty insurance operations of Crump Group Inc. – the second largest wholesale insurance distributor in the United States – from J.C. Flowers & Co. LLC for $570 million in cash.

The asset sales signal a tentative pickup in deal activity in the insurance industry, as valuations in some areas begin to recover. Typically, the non-risk bearing segment of the industry, such as insurance brokers, tend to see benefits of increasing prices before the insurance companies themselves.

Representatives of Stone Point and Genex declined to comment, while spokespeople for Cunningham Lindsey and Fairfax did not respond to a request for comment.

Separately, Stone Point is also selling Genex Services Inc., a care management service provider to insurance carriers, the sources said. Stone Point bought Genex in March 2007. Bank of America Merrill Lynch is advising on that sale as well, the sources said.

Stone Point owns a majority stake in Cunningham Lindsey, while property/casualty insurer and reinsurer Fairfax Financial Holdings Ltd. owns a large minority stake. First round bids are expected near the end of this month, the sources said.

Bank of America Merrill Lynch is advising Cunningham Lindsey on the auction, the sources said, adding that the company is expected to draw interest from private equity firms.

Cunningham Lindsey, an insurance claims management company controlled by buyout firm Stone Point Capital LLC, is up for sale and could fetch more than $1 billion, sources familiar with the situation said.

Posted by insurance - October 13, 2018 at 10:16 am

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Paulson Says Hartford’s Plan Is Just ‘A First Step’



“We do not believe today’s actions will materially increase P/C investor interest in The Hartford.”

“While we appreciate the extensive work of The Hartford’s board and management, we do not believe the positive actions announced today address the main problem with The Hartford’s undervaluation: the lack of interest from P/C analysts and P/C investors in The Hartford’s best-in-class P/C business due to its affiliation with unrelated, low-return and complex businesses,” Paulson & Co. stated.

Paulson would like to see more changes at The Hartford going forward, according to the statement.

“Successful execution of these plans will strengthen the company’s ability to separate the P/C and non-P/C businesses in the future, which we continue to believe would create the greatest short-term and long-term shareholder value and strengthen the company.”

“We believe that putting the variable annuity business in runoff and selling the non-core individual life, retirement plans and broker dealer businesses will raise cash, free up capital, permit de-leveraging and increase its financial flexibility.”

“We are pleased that The Hartford is taking steps to focus on core operations and to divest or discontinue non-core and capital intensive businesses,” according to the statement from Paulson & Co.

Paulson’s hedge fund, Paulson & Co. Inc., issued a statement Wednesday saying that it supports the insurer’s actions, “not as a conclusion of the strategic review, but as a first step in creating a clear delineation between The Hartford’s P/C and non-P/C businesses.” Paulson & Co. owns 8.5 percent of The Hartford.

Paulson wants to see more changes at The Hartford to clearly delineate the P/C and non-P/C businesses.
John Paulson, a billionaire hedge fund manager and the largest shareholder of The Hartford Financial Services Group, says the company’s plan to exit most of its life insurance businesses is a good start — but just a first step.

Posted by insurance - October 13, 2018 at 10:16 am

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Glatfelter Public Practice Adds Cyber Liability Coverage


A computer forensic analysis to determine the cause and extent of the privacy breach
A crisis management review and advice by an approved independent crisis management or legal firm
Expenses associated with notifying affected parties to maintain goodwill or comply with any notification requirements imposed by law (notification to affected parties for printing, advertising, mailing of materials or other costs)
Call center services for credit monitoring as well as identity theft education and assistance for affected individuals
Travel expenses by directors and employees to mitigate damages

Coverage will be offered in states where municipalities and water related entities are currently written.

The cost to defend suits brought by affected parties
Negligence
Failure to maintain reasonable security procedures

Privacy crisis management expense coverage (first party) has limits of $50,000 with the option to purchase higher limits. Following a privacy event, it pays applicable reasonable and necessary fees on behalf of the insured. These include:

Cyber liability coverage (third party) has limits of $1 million occurrence/$3 million aggregate, and if an excess policy is purchased, cyber liability coverage extends through the excess. It offers protection for claims seeking monetary damages as a result of an electronic information security event, including:

Cyber liability and privacy crisis management coverage is offered on the Glatfelter Public Practice public officials management liability policy written through an insurance carrier rated A+, XV by A.M. Best Company. Coverage offered with no deductible.

“More than 500 million records have been breached since 2005, and the federal government, as well as 47 states, have mandated that all affected parties be notified and offered credit monitoring services after a breach,” said Mark McCrary, president of Glatfelter Public Practice. “As a result, the cost of these losses can be significant, so it is important for a public entity to protect itself.”

The coverage is triggered by data breach incidents in which a public entity may be held legally liable. These incidents include personally identifiable information such as social security numbers being taken or released from an entity’s computer system, transmission of malware from their computer to a third party, or a denial of service attack resulting in the inability to use computers or web sites.
Glatfelter Public Practice has introduced cyber liability & privacy crisis management expense coverage for municipalities and water related entities nationwide. Glatfelter Public Practice is part of Glatfelter Program Managers, a business unit dedicated to Glatfelter Insurance Group’s program business.

Posted by insurance - October 11, 2018 at 10:16 am

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After Failure, MetLife Criticizes Federal Reserve Stress Test As Flawed for Insurers





(Reporting By Ben Berkowitz, additional reporting by Jonathan Stempel and Walden Siew in New York and Rick Rothacker in Charlotte; Editing by Alwyn Scott and Tim Dobbyn)

“There’s so much more credibility when you actually have some of these banks fail the stress tests,” said Keith Davis, a bank analyst and principal at money manager Farr, Miller & Washington. “When you actually have banks submitting capital plans and requests to return capital, and it’s denied, I think that says a lot about … how aggressive (the Fed) is being in terms of assumptions.”

While market reaction for the four was negative, some took the contrarian view, arguing that having banks fail was actually a good sign that proved the legitimacy of the testing. European bank stress tests were at one time roundly condemned when many troubled banks end up passing.

SunTrust was the last of the banks to respond, more than three hours after the Fed released the test results. It said its own models were “significantly more favorable” than the Fed’s, and that it expected to beat earnings estimates for the current quarter.

FAILURES LEGITIMIZE TESTS

“The analysis dramatically overstates potential contingent mortgage risk, especially with respect to new vintages of loans,” the company said in a statement, adding that it also would submit a new capital plan in the near future.

Ally, in a statement, said it supported the idea of stress testing but that the results were “inconsistent” with how the company viewed its situation.

“We are deeply disappointed with the Federal Reserve’s announcement,” Chief Executive Steve Kandarian said, adding that MetLife had sought permission for a $2 billion share buy-back and a 49 percent increase in its annual dividend. Both were in line with what analysts had expected the company to pay out.

In a statement the company condemned the stress tests as inappropriate for an insurance company and out of line with the standards used by its state regulators.

METLIFE CRITICAL OF FED

Last October, the Fed blocked MetLife’s capital plans in anticipation of the stress testing. The insurer is regulated as a bank holding company because of its online retail banking operations, though it struck a deal last December to sell them to General Electric Co.

“We plan to engage further with the Federal Reserve to understand their new stress loss models. We strongly encourage the public release of these models and the associated benchmarks and assumptions,” Citigroup said.

The bank said the Fed objected to its capital return plans but did not object to continuing its current dividend level. It added it plans to submit a new capital plan later this year.

Citi’s result was a substantial setback, as going into the tests some analysts felt it had a better chance of a positive surprise than any other financial institution.

“The initial reaction in the market is rather limited, but I think it is pretty negative that you had four banks fail. Citi and a few of the larger ones – it doesn’t bode well for the banking sector,” said Kathy Lien, director of research for GFT Forex in Jersey City, New Jersey.

The three listed companies – Citi, MetLife and SunTrust – were all down more than 3 percent in after-hours trading.

MetLife, the largest life insurer in the United States, and Citigroup, the nation’s third-largest bank, were among just four of 19 banks that didn’t pass the latest round of tests. Ally Financial and SunTrust also failed the exam, which applied worst-case scenarios through the end of 2013.

Citigroup and MetLife led a list of financial institutions that failed the Federal Reserve’s latest round of stress testing Tuesday, a shock result for two companies that were widely expected to return billions of dollars in extra capital to shareholders soon.

Posted by insurance - October 11, 2018 at 10:16 am

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Ratings Agencies Respond to The Hartford’s Plan to Exit Life Insurance





Moody’s said the holding company’s debt ratings currently are primarily based on support from its P/C operating subsidiaries. Moody’s said it does not consider the organization’s life insurance operating subsidiaries to be a supporter of the parent over the medium term due to a continued potential for capital volatility at the life operation under a stressed investment market scenario.

The announcement may also have an adverse impact on future sales and persistency in retained life business lines, namely group benefits and mutual funds, Moody’s cautioned.

According to Moody’s, Hartford’s large legacy variable annuity operations limit the diversification benefits of other life products. By scaling back its non-variable annuity operations, Hartford “becomes more exposed to the legacy block.” As Hartford was not selling a meaningful amount of new variable annuities, the recent announcement of placing the variable annuity into runoff does little to reduce this risk in the short term, the ratings agency said.

“From a credit perspective, the savings from exiting the individual annuity business are offset by the loss of income and diversification from exiting other business lines,” said Robinson.

Moody’s noted that there remains strong ties between the life and P/C businesses, and the rating agency said it expects that HIG would provide support to the life group in a stress scenario.

The negative outlook on Hartford Life & Annuity Co. (ILA) reflects the runoff status of the variable annuity business and its highly volatile risk profile, Robinson said.

As for Moody’s affirmation of the life insurance group ratings, Moody’s analyst Scott Robinson sad it reflects the life group’s “strong market position in group insurance, the company’s recognizable brand name, and the implicit support of the ultimate parent company.”

Moody’s said its A2 IFS ratings of the members of The Hartford’s P/C Insurance Group are based on the group’s “significant market presence, strong brand name recognition, excellent product and geographic diversification, historically conservative underwriting standards, and reasonably positioned investment portfolio.” Moody’s said these strengths are offset by exposure to catastrophes, pressure on earnings from a continued highly competitive P/C insurance market, risk of adverse development on run-off reserves which include significant asbestos and environmental liabilities, and the continued implied support of the group’s affiliated life operations even as these operations are de-emphasized

“Overall we think the shift in focus towards The Hartford’s stronger property and casualty operations and decision to shut down its highest risk line of business is credit positive; however, given the nature of variable annuity contracts, it will nevertheless take a long time to materially reduce total risk,” Bauer said.

Moody’s Comment

Commenting on his firm’s ratings affirmation, Moody’s analyst Paul Bauer welcomed The Hartford’s move overall.

Also, S&P said it could take further negative rating action on the life subsidiaries if other economic pressures force capitalization below the strong levels expected for the rating. “We see little prospect of positive rating action, given that the businesses in the life subsidiaries are likely to be sold or restructured,” S&P said.

S&P said it could take negative rating action on HIG if the P/C operation’s competitive position weakens, equity markets decline sharply, and ongoing operating results (excluding catastrophe losses) deteriorate, taking HIG’s fixed-charge coverage below 4x.

The stable outlook on HIG and the Hartford P/C business reflects S&P’s opinion that the group will “sustain its strong competitive position and business profile in the consumer and commercial segments.” S&p said it could raise the ratings on the holding company and the P/C operations if the group “successfully executes its new strategic plan, thus reducing its leverage and market risk throughout the organization, and if HIG maintains its favorable P/C business profile and manages the overall enterprise’s risk effectively.”

AML contains the legacy block of life insurance business written to AARP members. We affirmed the ‘A-‘ rating on AML. We acknowledge that Hartford remains committed to AARP members for P/C operations.

HILRE, a subsidiary of HLIC, reinsures Hartford’s institutional private placement business. The downgrade to ‘A-‘ from ‘A’ reflects management’s reduced focus on the life insurance business.

HLAI, a subsidiary of HLIC, contains most of the legacy U.S. variable-annuity block that is to be placed into run-off. HLAI also writes individual life business, which we expect Hartford to divest. S&P said the downgrade to ‘BBB+’ from ‘A’ and negative outlook reflects our opinion that HLAI’s capitalization will fluctuate as a result of the equity markets’ effect on the variable-annuity liabilities, and its reliance on the effectiveness of a large variable-annuity hedging program.

HLIC, a subsidiary of HLA, is the predominant writer of HIG’s individual retirement plans, fixed annuities, and institutional investment products. The downgrade to ‘A-‘ from ‘A’ reflects the uncertainty of earnings under current market conditions, offset by HLIC’s strong competitive position and good capitalization, according to S&P analysts.

HLA is HIG’s organizational lead life insurance operating company, and predominantly underwrites the group benefits book of business. S&P said the downgrade to ‘A-‘ from ‘A’ “reflects its stand-alone credit characteristics of higher incidence levels relative to peers and depressed earnings recently experienced in group benefits, offset by the business’ strong competitive position.

Hartford will discontinue new sales of domestic individual annuities on April 27, 2012, putting that business into run-off. The company will also initiate sales processes for its individual life and retirement plans businesses, as well as for Woodbury Financial Services, Hartford’s independent broker-dealer. For now, these businesses remain part of the consolidated group and retain their access to the strong consolidated capital resources and liquidity of the consolidated company, according to S&P.

S&P said it expects HIG to “remain highly committed” to its consumer and commercial segments, where it enjoys leading market shares in the small commercial market segment and a long-term affinity relationship with AARP. The group benefits business (group life and disability insurance) remains a component of the commercial market, for which Hartford has indicated continued focus and commitment.

S&P said its rating actions reflect a change in its view of Hartford Life’s group status, given that its ultimate parent, HIG, intends to withdraw sales of individual annuities while seeking to sell its individual life and retirement plan businesses. The revised ratings are based on each subsidiaries’ stand-alone credit characteristics and the reduced implied support from the parent, S&P said.

The ‘A-‘ rating on American Maturity Life Insurance Co. (AML) was affirmed by SP. The outlook on HLAI is negative, and the outlook on all other Hartford entities is stable.

At the same time, S&P affirmed its ‘BBB/A-2′ ratings on HIG itself and those on its holding company debt, and its P/C insurance operating subsidiaries.

S&P Comment

S&P lowered its counterparty credit and insurer financial strength ratings on most of the subsidiaries of Hartford Financial Services Group Inc. previously considered aggregated under Hartford Life: Hartford Life and Accident Insurance Co. (HLA), Hartford Life Insurance Co. (HLIC), Hartford Life and Annuity Insurance Co. (HLAI), Hartford International Life Reassurance Corp. (HILRE).

Moody’s changed the outlook on Hartford Life & Annuity Insurance Co. (insurance financial strength (IFS) at A3), which contains the majority of the group’s individual annuity business, to negative from stable. The outlook on The Hartford’s other life subsidiaries, P/C subsidiaries and holding company remains stable, according to Moody’s.

In its response, Moody’s Investors Service affirmed the credit ratings of The Hartford Financial Services Group Inc. and its key operating subsidiaries.

It affirmed its ratings on the holding company, the holding company debt, and the property/casualty subsidiaries represented by the Hartford Fire group.

S&P also said it is downgrading to ‘BBB-‘ the $240 million senior debt issued by Hartford Life Inc.
In response to Hartford Financial Services Group Inc.’s planned exit from some of its life insurance business, Standard & Poor’s Rating Services said it is downgrading the subsidiaries previously aggregated under Hartford Life, and assigning individual ratings and outlooks to each legal entity.

Posted by insurance - October 11, 2018 at 10:16 am

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MBIA Reportedly Ready to Settle with UBS Over Restructuring





The cases are ABN Amro Bank NV, et al, v Eric Dinallo 601846/2009 and ABN Amro Bank NV et al v. MBIA Inc., 601475/2009, both in New York state Supreme Court.

Robert Giuffra, lead counsel for the banks still suing MBIA, did not return a call for comment.

A spokesman for the Department of Financial Services declined comment. Lawsky has said his agency was working with the banks and MBIA to seek resolutions.

Benjamin Lawsky, Superintendent of New York’s Department of Financial Services, was involved in brokering the UBS deal, according to another person familiar with the matter.

Other banks that had been party to the lawsuits and which settled include Morgan Stanley, Royal Bank of Scotland Group Plc and Wells Fargo & Co. Bank of America Corp., Natixis SA and Societe Generale are still pursuing claims against MBIA.

The banks also sued New York’s then-superintendent of insurance, Eric Dinallo, who had approved MBIA’s 2009 split.

The split divided MBIA’s municipal bond business from its structured finance operations, which suffered big losses from insuring mortgage debt

The banks sued MBIA in 2009, claiming the insurer’s restructuring was intended to defraud policyholders. They said the restructuring left MBIA undercapitalized and possibly unable to pay their claims.

UBS has not yet filed legal documents in New York state Supreme Court withdrawing from the litigation.

The bank said it reduced its net trading income for 2011 by 167 million Swiss francs ($180 million) after agreeing to commute certain credit-default swap contracts in exchange for the net cash payment.

UBS revealed in its annual report on Thursday that it had agreed to a settlement in principle with a monoline insurer and described some of its terms. That filing did not identify MBIA by name.

UBS, based in Zurich, is the latest bank to agree to give up legal claims against the Armonk, New York-based bond insurer. Fourteen other banks have settled, while three are still challenging the insurer’s split.

UBS and MBIA representatives declined comment. The people familiar with the matter declined to be identified because the settlement has not been confirmed publicly.

The UBS settlement calls for credit-default swaps to be commuted in exchange for a cash payment, the people said. The amount of the cash payment was not immediately clear.

UBS AG has agreed to settle litigation against MBIA Inc. that challenged the bond insurer’s 2009 restructuring, people familiar with the matter said on Thursday.

Posted by insurance - October 11, 2018 at 10:16 am

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Catastrophe Frequency, Tornadoes Test Insurers in U.S.: A.M. Best



“The impact of 2011’s increased tornado activity prompted many insurers to accelerate their pace of rate increases, reduced limits and policy exclusions,” said best. “Some insurers reconsidered what risks they were willing to write and withdrew from certain climate-change challenged markets altogether.”

According to Swiss Re, insured losses for tornado and hail damage in the United States reached $14 billion in 2011.

But, according to insurers, tornadoes were the costliest type of U.S. natural disaster in 2011.

Best pointed out that until 2011, tornadoes typically were not considered one of the larger risks for the insurance industry in total. It has been rare for a series of tornadoes to inflict more than $1 billion in losses.

“In addition, it is clear insurers should prepare for the possibility that the event frequency of 2011 may be repeated,” Best said.

Best said that, while many are expecting catastrophe events to return to a more normalized level in 2012, others are questioning what “normal” is.

Best described 2011 as producing an “uncharacteristic series of devastating natural disasters,” which has led to the year being dubbed the “year of the cat.”

“The insurance industry continues to be tested as catastrophic weather events have recently become more common and more severe,” Best said in a briefing.
According to A.M. Best Co., the frequency of catastrophe weather events represents the “new normal” for the insurance industry.

Posted by insurance - October 11, 2018 at 10:16 am

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Hartford to Repay Allianz’s $2.4 Billion of Crisis Aid





Allianz separately said the deal with The Hartford would reduce the German company’s risky capital by 1.5 billion euros.

The buyback will also remove an overhang from The Hartford; every few months, rumors have surfaced in European markets that Allianz may buy the company. Both sides have always categorically denied such rumors.

Its shares rose 76 cents to $21.84 in afternoon trade. The stock is up 0.6 percent since the company revealed the breakup plan, mirroring th e broader sector.

The Hartford was one of three insurers to receive a U.S. government rescue during the financial crisis, and in recent times its valuation has severely lagged peers.

Paulson has called that plan a good first step, though he continues to insist the company would be better off splitting its property insurance business from the rest of its operations, including a mutual fund unit.

Last month, amid heavy pressure from its largest shareholder, hedge fund manager John Paulson, The Hartford said it would sell off most of its life insurance-related operations and shut down its annuity business.

Sterne Agee analyst John Nadel said the company was saving about $700 million with the deal compared with what it may have had to pay Allianz contractually, plus up to $75 million a year in pretax interest expense. Nadel said the deal will not raise Hartford’s earnings or book value per share.

In a statement, the insurer said the buyback — to be partly financed by issuing new debt and partly by its stock buyback program — would give it “additional financial flexibility and an improved capital structure.”

In early October 2008, during the deepest point of the crisis, Allianz pumped $2.5 billion into The Hartford via preferred shares, debentures and warrants. After the repurchases announced Monday, Allianz will still own about 5 percent of the company, worth $464 million as of Friday’s close.

The Hartford’s shares rose 3.7 percent in afternoon trading, far outperforming the sector, as one analyst said the deal could save the company hundreds of millions of dollars.

The Hartford Financial Services Group plans to repay most of a rescue it received during the financial crisis, buying back debentures and warrants from Germany’s Allianz SE for $2.43 billion.

Posted by insurance - October 9, 2018 at 10:17 am

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Best Puts The Hartford and Subs Ratings Under Review



A complete listing of the ratings for The Hartford Financial Services Group, Inc. and its key life/health and property/casualty subsidiaries’ FSRs, ICRs and debt ratings is available.

Best said it would “continue to work with management as steps are taken toward accomplishing the plan and will evaluate the under review status as appropriate. Due to the scope of the plan, the ratings may remain under review for an extended period of time.”

“At the same time, however, the under review with developing implications status acknowledges the execution risk associated with the plan and the potential for some continued volatility related to the Individual Annuity business that will be retained, which could have negative implications on the ratings of both the Hartford and the Pool.”

Best also noted that it views the “increase in financial flexibility at the holding company, the expected reductions in financial leverage and the benefits of a more focused management strategy centered around the company’s property/casualty business” as positive factors. Best added that if the plan is achieved as expected, it “would likely result in favorable rating action on these entities.

The rating actions for the Hartford and the Pool “acknowledge the potential for successful implementation of the restructuring plan in line with management’s expectations to result in favorable movement on the ratings,” Best continued.

“Nevertheless, the planned divestitures will allow Hartford Life to release capital allocated to these businesses and potentially upstream funds to the parent. It is currently uncertain what impact the restructuring will have on the group’s remaining investment portfolio.”

Best said it “believes execution risk may be somewhat diminished by the perceived attractiveness of the Individual Life and Retirement Services businesses.” The rating agency also indicated that at this point the Hartford’s “plans do not involve the sale of insurance entities, which may expedite the process.” However, Best added, that the “longer it takes to consummate a transaction, the less likely management will generate its targeted proceeds from the sale.

As a result the under review with negative implications status “recognizes the potential for changes in Hartford Life’s ratings and outlook based on the final outcome of management’s intended restructuring.”

Best also explained that the “rating actions for the Hartford Life subsidiaries reflect the execution risk in the current economic environment of the group’s plans to divest its Individual Life, Woodbury Financial Services and Retirement Plans businesses. Additionally, the revised strategy will cause Hartford Life’s business profile to contract over time and be limited to the ongoing Group Benefits and Mutual Funds businesses, as well declining in-force blocks of fixed and variable annuities. This will result in reduced life/health revenues and earnings available to the enterprise.”

Best said it had taken the rating actions following The Hartford’s decision “to focus its strategy on the company’s property/casualty, group benefits and mutual funds businesses. The company will place its individual annuity business into run off effective April 27, 2012. The company is pursuing other options for certain product lines within its Wealth Management segment, including sales or other strategic alternatives.”

Best has also placed under review, however, with negative implications, the FSR of ‘A’ (Excellent) and ICRs of “a+” of the Hartford’s key life/health insurance subsidiaries (collectively known as Hartford Life.
A.M. Best Co. has placed under review with developing implications the issuer credit rating (ICR) of “bbb+” and the debt ratings of The Hartford Financial Services Group, Inc., as well as the ICRs of “a+” and the financial strength rating (FSR) of ‘A ‘(Excellent) of the Hartford Insurance Pool.

Posted by insurance - October 9, 2018 at 10:16 am

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