TEXT-S&P affirms American National Insurance 'A' rating

Fri Sep 28, 2012 4:08pm EDT

Overview
     -- American National Insurance Co. (ANICO) and its related subsidiaries 
continue to meet operating objectives and maintain capital strength.
     -- We are affirming our ratings on the core and strategically important 
operating companies within the ANICO group. The outlook on these ratings is 
stable.
     -- We are revising the group status of Garden State Life Insurance Co. to 
nonstrategically important from strategically important and lowering our 
rating on that company to 'BBB' from 'A-'.
     -- Subsequently. we are withdrawing our ratings on American National 
Property & Casualty Co. and its wholly owned subsidiary American National 
General Insurance (together ANPAC), and Garden State at the issuer's request.

Rating Action
On Sept. 28, 2012, Standard & Poor's Ratings Services affirmed its ratings on 
the core and strategically important operating companies of the American 
National Insurance Co. group, including ANICO, American National Life 
Insurance Co. of New York (ANICONY), American National Life Insurance Co. of 
Texas, and ANPAC--all of which we deem to be core to the group--as well as our 
ratings on Standard Life & Accident Insurance Co. of Texas, which we consider 
to be strategically important to the group. The outlook on these ratings 
remains stable.

We have also revised our view of the group status of Garden State to 
nonstrategically important from strategically important and lowered our rating 
on Garden State to 'BBB' from 'A-'. The outlook remains stable. Subsequently, 
we withdrew the ratings on ANPAC and Garden State at the issuer's request.

Rationale
The insurer financial strength and counterparty credit ratings on ANICO and 
its related operating companies are based primarily on the group's diversified 
business segments, broad array of product offerings, and the diversified 
distribution channels that support them. The group's life and annuity 
businesses have also been consistently profitable, offsetting certain 
weaknesses in other operating segments, notably the property and casualty 
(P/C) operations. In our opinion, the group's financial profile, including its 
capitalization and sources of liquidity, are relative ratings strengths. We 
also believe the group has adequate financial flexibility with minimal 
outstanding debt (associated with future funding commitments) and, as a public 
company, could access public equity markets if necessary.

While ANPAC has been affected by the increased frequency and severity of 
severe weather events, management has taken a number of steps to address the 
negative effect on operating performance by limiting certain risk exposures, 
undertaking price increases, and materially increasing its catastrophic 
reinsurance coverage. While ANPAC has incurred an operating loss through the 
first half of 2012, its performance is greatly improved over recent periods, 
and the seasonal nature of its business suggests that financial performance 
will improve through the remainder of 2012. ANPAC's financial profile is a 
rating strength as it continues to maintain very strong capital and liquidity. 
The outlook remains stable.

The change in the group status of Garden State to nonstrategically important 
from strategically important reflects the general decrease in operating 
activity over the past two years. Operating performance remains positive and 
capital remains strong, however, decreased revenues have resulted in a 
reduction to Garden State's operating contribution to the ANICO group. As per 
our criteria, we assume nonstrategically important operating companies receive 
less ongoing support from the group. As a result of the change in group 
status, we lowered our rating on Garden State to 'BBB' from 'A-'. The outlook 
remains stable.

Subsequently, we withdrew the ratings on ANPAC and Garden State at the 
issuer's request.

Outlook
The stable outlook reflects our opinion that the group's earnings diversity 
will be reflected in the strong performance of ANICO's life and, to a lesser 
extent, annuity businesses, which will offset potential weakness in the P/C 
business. We also expect the group to maintain a financial profile that 
supports the ratings and to execute strategic initiatives to address its 
long-term goals and objectives.

We anticipate that ANICO will generate relatively flat to marginally negative 
revenue growth in 2012 and 2013 as the company faces some challenging market 
conditions and economic headwinds. Nevertheless, we believe the company should 
generate a healthy consolidated generally accepted accounting principles 
(GAAP) pretax return on assets of about 0.60% annually in 2012 and again in 
2013. We expect the insurer's source of positive earnings will remain well 
diversified among its life, annuity, and health insurance product lines and 
that its P/C will improve, although it likely will not be a positive earnings 
contributor until 2013. We expect its capital strength, per our model, to 
remain supportive of the current ratings.

We do not anticipate a positive rating action in the coming months. We could 
revise the outlook to negative if the company demonstrates significant 
negative variance relative to our expectations.

Related Criteria And Research
Group Methodology, April 22, 2009

Ratings List
Ratings Affirmed

American National Insurance Co.
American National Property & Casualty Co.
American National Life Insurance Co. of Texas
American National Life Insurance Co. of New York
American National General Insurance Co.
 Counterparty Credit Rating
  Local Currency                        A/Stable/--
 Financial Strength Rating
  Local Currency                        A/Stable/--

American National Insurance Co.
 Financial Enhancement Rating
  Local Currency                        A/--/--

Standard Life & Accident Insurance Co.
 Counterparty Credit Rating
  Local Currency                        A-/Stable/--
 Financial Strength Rating
  Local Currency                        A-/Stable/--

Downgraded
                                        To                 From
Garden State Life Insurance Co.
 Counterparty Credit Rating
  Local Currency                        BBB/Stable/--      A-/Stable/--
 Financial Strength Rating
  Local Currency                        BBB/Stable/--      A-/Stable/--

Not Rated Action
                                        To                 From
American National General Insurance Co.
American National Property & Casualty Co.
 Counterparty Credit Rating
  Local Currency                        NR/--              A/Stable/--
 Financial Strength Rating
  Local Currency                        NR/--              A/Stable/--

Garden State Life Insurance Co.
 Counterparty Credit Rating
  Local Currency                        NR/--              BBB/Stable/--
 Financial Strength Rating
  Local Currency                        NR/--              BBB/Stable/--

Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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