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Insurance ratings actions: Moody's downgrades Molina, Fitch affirms Validus

S&P Global Market Intelligence compiles ratings actions in the insurance space daily through 5:30 p.m. ET. Actions after 5:30 p.m. ET will be included in the following day's roundup.

Managed Care

Moody's has downgraded the senior unsecured debt ratings of Molina Healthcare Inc. to B3 from B2.

The agency has also downgraded the insurance financial strength ratings to Ba2 from Ba1 of Molina subsidiaries Molina Healthcare of California, Molina Healthcare of Michigan Inc., Molina Healthcare of New Mexico Inc., Molina Healthcare of Ohio Inc., Molina Healthcare of Texas Inc. and Molina Healthcare of Washington Inc.

The outlook on Molina and its subsidiaries has been changed to stable from negative.

The ratings actions reflect Moody's assessment that Molina's credit profile has further weakened following the loss of significant Medicaid contracts in Florida and New Mexico, effective Jan. 1, 2019. Additionally, the company posted an operating loss of $555 million for 2017, reflecting numerous operating weaknesses, including being cited for a material weakness by its auditors, Moody's said.

All the ratings are based primarily on the company's concentration in the Medicaid market and numerous operational weaknesses that resulted from its rapid growth in recent years, Moody's said.

Property and casualty

A.M. Best has downgraded the financial strength ratings to B+ (Good) from B++ (Good) and the long-term issuer credit ratings to "bbb-" from "bbb+" of Zale Indemnity Co. and its subsidiary Zale Life Insurance Co.

The outlook remains stable.

The ratings reflect the companies' balance sheet strength, as well as each company's marginal operating performance, limited business profile and appropriate enterprise risk management, the rating agency said.

A.M. Best said the ratings were downgraded based on management's recent decision to discontinue writing all credit products and most warranty and extended service products. The rating agency said this decision dramatically lessens the future business prospects and long-term profitability prospects for these two insurers.

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A.M. Best has revised the outlook to negative from stable and affirmed the long-term issuer credit ratings of "a-" and the existing long-term issue credit ratings of AXIS Capital Holdings Ltd.

Additionally, A.M. Best has revised the outlooks to negative from stable and affirmed the financial strength ratings of A+ (Superior) and the long-term issuer credit ratings of "aa-" of the operating subsidiaries of AXIS Capital AXIS Specialty Ltd., AXIS Re SE, AXIS Reinsurance Co., AXIS Specialty Europe SE, AXIS Surplus Insurance Co. and AXIS Insurance Co.

The ratings reflect the strongest balance sheet strength of AXIS Capital and its subsidiaries, their strong operating performance, favorable business profile and appropriate enterprise risk management from the group's risk profile, A.M. Best said.

The revised outlooks are based on unfavorable trends in the group's operating performance, particularly from AXIS Capital's insurance segment, the rating agency added.

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A.M. Best has affirmed the financial strength rating of B- (Fair) and the long-term issuer credit rating of "bb-" of Castle Key Insurance Co., Castle Key Indemnity Co., Encompass Floridian Insurance Co. and Encompass Floridian Indemnity Co.

The outlook of these ratings remains stable.

The ratings reflect the companies' balance sheet strength, which A.M. Best characterized as "weak," as well as their adequate operating performance, limited business profile and appropriate enterprise risk management.

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A.M. Best has removed from under review with positive implications and affirmed the financial strength rating of A- (Excellent) and the long-term issuer credit rating of "a-" of Dealers Assurance Co.

The outlook assigned to these ratings is positive.

The agency said the ratings reflect the company's balance sheet strength, its adequate operating performance, neutral business profile and appropriate enterprise risk management.

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Fitch Ratings has affirmed the A- issuer default rating of Validus Holdings Ltd. and the A (Strong) insurer financial strength rating of Validus' operating subsidiary Validus Reinsurance Ltd.

The ratings affirmation is part of Fitch's annual review process. Fitch said it reflects Validus' "strong business profile with increasing diversity in the company's book of business and continued growth in its asset management segment."

The affirmation also reflects "a history of very strong operating performance on an absolute basis and relative to peers and a decrease in peak probable maximum loss exposure relative to equity," Fitch wrote.

The rating agency characterizes Validus' business profile as strong.