A.M. Best Co. in Oldwick, N.J., said Thursday that it has placed the A-plus financial strength rating for the primary life insurance entities of ING Group's U.S. operations under review with negative implications.
The rating action came after ING's recent announcement that it intends to coinsure its U.S. individual life reinsurance business with Scottish Re Group Ltd. Fitch Ratings Ltd. had put the Dutch insurer's U.S. units on negative ratings watch Monday in connection with the same deal.
A.M. Best said in a press release that it expects an unfavorable impact on ING's U.S. profitability in the short term due to losses arising from the payment of a $560 million negative ceding commission, the writeoff of deferred-tax assets, and a mortality adjustment to reduce deferred acquisition costs. In addition, the Scottish Re deal has been structured so that ING must maintain $3 billion in letters of credit between two of its operating companies to meet current and anticipated U.S. statutory Regulation XXX reserve requirements.
The negative outlook for ING USA's ratings reflects A.M. Best's view that the U.S. group's overall capitalization and its operating performance are somewhat below expectations for an A-plus-rated company. ING USA has seen improvement this year in operating returns and strength in sales, while capital remained essentially flat. The under-review status reflects A.M. Best's need to fully assess the short-term and long-term effects of the coinsurance deal.
