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