A.M. Best Affirms Ratings of Aegon N.V.’s U.S. Subsidiaries
April 15 2016 - 11:33AM
Business Wire
A.M. Best has affirmed the financial strength rating
(FSR) of A+ (Superior) and the issuer credit ratings (ICR) of “aa-”
of the U.S. life/health subsidiaries of Aegon N.V. (Aegon)
(Netherlands) [NYSE: AEG]. Aegon’s U.S. life/health companies are
collectively referred to as Aegon USA Group (Aegon USA).
Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and
the ICR of “a” of Transamerica Casualty Insurance Company
(Transamerica Casualty) (Columbus, OH), the property/casualty
member of Aegon USA. The outlook for each rating is stable. (See
below for a detailed listing of the companies and ratings.)
The rating affirmations of Aegon USA reflect the strong business
profile, adequate risk-adjusted capitalization, strong enterprise
risk management and an underlying trend of statutory and IFRS
profitability. The ratings also reflect A.M. Best’s continued
expectation of financial support from Aegon, the parent. Partially
offsetting these strengths is the increasing focus on sales of
variable annuities, which in A.M. Best’s view have higher risk
characteristics from a product creditworthiness standpoint. Equity
market sensitivity of its earnings and significant reliance on
captive reinsurance also partially offset the group’s
strengths.
Aegon USA’s business profile continues to remain strong, with
competitive market positions in the U.S. life and annuity arena.
The group’s market positions are supported by a large and
diversified distribution system. Product lines that contribute to
the company’s earnings diversification include traditional life,
variable life, variable annuities, mutual funds, pensions and
accident and health insurance. Risk-adjusted capitalization, as
measured by Best’s Capital Adequacy Ratio (BCAR), is considered
sufficient to support its current business and insurance risks.
While volatility does exist in the operating profile of Aegon USA,
the U.S. entities continue to maintain an underlying trend of
profitability on a statutory and IFRS basis.
The company has made a strategic shift to focus on selling
fee-based products, especially variable annuities, and has
de-emphasized spread-based products, particularly fixed annuities.
In a relatively stable capital market environment, the required
capital on variable annuities is generally less than that required
for the fixed annuity/spread-based products. However, A.M. Best
views variable annuities with living benefit riders as displaying
some of the highest risk characteristics, as well as being
vulnerable to tail risks, which could lead to an increase in
required capital. In addition, the organization’s increasing
exposure to variable annuities exposes its earnings to volatility,
and while hedged, Aegon USA’s earnings remain somewhat correlated
to capital market performance. A.M. Best also notes that Aegon USA
has relied heavily on captive reinsurance to finance reserves
generated from term life and universal life insurance with
secondary guarantees. Financing provided to these captives include,
but are not limited to, surplus notes, letters of credit and
parental guarantees.
The rating actions on Transamerica Casualty acknowledge its
ongoing profitability, its role and strategic importance as a
member of Aegon USA, the explicit reinsurance support provided by
Transamerica Life Insurance Company and the benefits of
receiving implied support if necessary in the future. In addition,
the ratings recognize Transamerica Casualty’s strong
capitalization, the benefits it gains from relationships with
affiliates and management’s knowledge and expertise in the travel
insurance market. The stable outlook reflects the continuation of
operating profitability, expected favorable earnings opportunities,
established business partnerships and a commitment to maintain a
level of capitalization that is supportive of its ratings. A.M.
Best believes Transamerica Casualty is well-positioned at its
current rating level.
The FSR of A+ (Superior) and the ICRs of “aa-” have been
affirmed for the following members of Aegon USA Group:
- Transamerica Life Insurance
Company
- Transamerica Financial Life
Insurance Company
- Transamerica Premier Life Insurance
Company
- Transamerica Advisors Life Insurance
Company
The FSR of A (Excellent) and the ICR of “a” have been affirmed
for Transamerica Casualty Insurance Company.
This press release relates to rating(s) that have been
published on A.M. Best’s website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please see A.M.
Best’s Recent Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2016 by A.M. Best Rating
Services, Inc. ALL RIGHTS RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20160415005664/en/
A.M. BestAnthony McSwieney, +1 908 439 2200, ext.
5715Senior Financial Analyst –
L/Hanthony.mcswieney@ambest.comorAngelo Lozano, +1
908 439 2200, ext. 5169Financial Analyst –
P/Cangelo.lozano@ambest.comorChristopher Sharkey,
+1 908 439 2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
+1 908 439 2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
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