Research: Announcement of Periodic Review: Moody’s announces completion of a periodic review for a group of Property and Casualty Insurer issuers

Date:

New York, July 14, 2022 — Moody’s Investors Service (“Moody’s”) has completed a periodic review of the ratings -and other ratings that are associated with the same analytical units for the rated entity(entities) listed below.

The review was conducted through a portfolio review discussion held on 7 July 2022 in which Moody’s reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. A possible outcome from periodic reviews is a referral of a rating to a rating committee.

This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.

Key Rating Considerations

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The principal methodology used for the rated entities listed below was Property and Casualty Insurers Methodology published in September 2021. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.

Property and Casualty Insurers Methodology

Market Position, Brand and Distribution: Market position, brand and distribution are key factors representing a company’s ability to develop and sustain competitive advantages in its chosen markets. Metrics can include but are not limited to relative market share, underwriting expense ratio, and diversity of distribution channels.

Product Focus and Diversification: A company’s chosen business lines have a major influence on its risk profile and creditworthiness because business classes have distinct volatility and competitive attributes. Metrics can include but are not limited to product line and geographic diversification, relative volatility of product lines, and breadth and depth of markets served.

Asset Quality: P&C insurers mainly invest in high-quality liquid assets, given the uncertain timing and magnitude of their liability payments, although companies often allocate a portion of their investments to higher-risk assets. Metrics can include but are not limited to high-risk assets, reinsurance recoverables and goodwill & intangibles as percentages of equity, as well as investment concentrations and portfolio liquidity.

Capital Adequacy: An insurer’s capital adequacy determines the extent to which it can absorb losses stemming from business and financial risks, including from stress scenarios. Metrics can include but are not limited to gross underwriting leverage, regulatory capital ratios, insurers’ own capital adequacy metrics, and output from Moody’s Capital Tool.

Profitability: An insurer’s earnings capacity, including earnings quality and sustainability, shows how readily it can meet policy and other financial obligations and generate capital internally. Metrics can include but are not limited to combined underwriting ratio, return on capital, return on equity, return on revenue, and volatility of such returns.

Reserve Adequacy: Our estimate of the redundancy or deficiency of an insurer’s loss and loss adjustment expense reserves helps shape our assessment of its reported earnings and capitalization. Metrics can include but are not limited to yearly and weighted average loss development as a percentage of reserves, funding ratio of latent liabilities, and various actuarial estimates.

Financial Flexibility: Insurers benefit from the ability to raise capital externally for growth or acquisitions or to meet unexpected financial demands. Metrics can include but are not limited to adjusted financial leverage, total leverage, earnings coverage, and cash flow coverage, as well as holding company liquidity and access to committed credit facilities.

Other Rating Considerations: In addition to the factors discussed above, other factors such as management, enterprise risk, accounting policies and disclosures, sovereign and regulatory environment, and explicit or implicit support can affect the insurance financial strength ratings of insurance operating companies.

Instrument Notching Considerations: The ratings for debt and preferred stock instruments issued by insurance firms are generally notched down from the insurance financial strength ratings based on the issuing entity, jurisdiction, seniority, collateral, and other features of the instruments.

• Alleghany Property and Casualty Group

• Allstate Corporation (The)

• American Financial Group, Inc.

• American International Group, Inc.

• AmFam Holdings, Inc.

• Assurant, Inc.

• Chubb Limited

• Cincinnati Financial Corp

• CNA Financial Corporation

• CUMIS Insurance Society, Inc.

• Fairfax Financial Holdings Limited

• Farmers Insurance Group

• GEICO Corporation

• Hanover Insurance Group, Inc. (The)

• Hartford Financial Services Group, Inc. (The)

• Horace Mann Educators Corporation

• Intact Financial Corporation

• Kemper Corporation

• Liberty Mutual Group Inc.

• Markel Corporation

• Mercury General Corporation

• Nationwide Mutual Insurance Company

• Old Republic International Corporation

• ProAssurance Corporation

• Progressive Corporation (The)

• RLI Corp.

• Selective Insurance Group, Inc.

• Travelers Companies, Inc. (The)

• United Services Automobile Association

• W. R. Berkley Corporation

The principal methodology used for the rated entity listed below was Reinsurers Methodology published in November 2019. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.

Reinsurers Methodology

Market Position, Brand and Distribution: Market position, brand and distribution are key factors representing a company’s ability to develop and sustain competitive advantages in its chosen markets. Metrics can include but are not limited to relative market share, proportion of premiums written directly, average line size, and number of lead positions.

Business and Geographic Diversification: A company’s chosen business lines have a major influence on its risk profile and creditworthiness because business classes have distinct volatility and competitive attributes. Metrics can include but are not limited to product line and geographic diversification, and relative volatility of product lines.

Asset Quality: Reinsurer’s mainly invest in high-quality liquid assets, given the uncertain timing and magnitude of their liability payments, although companies often allocate a portion of their investments to higher-risk assets. Metrics can include but are not limited to high-risk assets, reinsurance recoverables and goodwill & intangibles as percentages of equity, as well as investment concentrations and portfolio liquidity.

Capital Adequacy: A reinsurer’s capital adequacy determines the extent to which it can absorb losses stemming from business and financial risks, including from stress scenarios. Metrics can include but are not limited to gross underwriting leverage, gross and net natural catastrophe exposures as percentages of equity, regulatory capital ratios, and reinsurers’ own capital adequacy metrics.

Profitability: A reinsurer’s earnings capacity, including earnings quality and sustainability, shows how readily it can meet policy and other financial obligations and generate capital internally. Metrics can include but are not limited to combined underwriting ratio, return on capital, return on equity, return on revenue, and volatility of such returns.

Reserve Adequacy: Our estimate of the redundancy or deficiency of a reinsurer’s loss and loss adjustment expense reserves helps shape our assessment of its reported earnings and capitalization. Metrics can include but are not limited to yearly and weighted average loss development as a percentage of reserves, funding ratio of latent liabilities, and various actuarial estimates.

Financial Flexibility: Reinsurers benefit from the ability to raise capital externally for growth or acquisitions or to meet unexpected financial demands. Metrics can include but are not limited to adjusted financial leverage, total leverage, and earnings coverage, as well as holding company liquidity and access to committed credit facilities.

Other Rating Considerations: In addition to the factors discussed above, other factors such as management, enterprise risk, accounting policies and disclosures, sovereign and regulatory environment, and explicit or implicit support can affect the insurance financial strength ratings of insurance operating companies.

Instrument Notching Considerations: The ratings for debt and preferred stock instruments issued by insurance firms are generally notched down from the insurance financial strength ratings based on the issuing entity, jurisdiction, seniority, collateral, and other features of the instruments.

• Fairfax Financial Holdings Limited

The principal methodology used for the rated entities listed below was Life Insurers Methodology published in September 2021. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.

Life Insurers Methodology

Market Position and Brand: Market position and brand are key factors representing a company’s ability to develop and sustain competitive advantages in its chosen markets. Metrics can include but are not limited to relative market share, absolute size, and position within selected markets.

Distribution: A company’s access to distribution channels, its ability to control those channels, and its relationships with producers affect its creditworthiness and standing in the market. Metrics can include but are not limited to proportion of captive or controlled distribution, and number of distinct distribution channels.

Product Focus and Diversification: A company’s chosen business lines and product offerings have a major influence on its risk profile and creditworthiness because product segments have distinct volatility and competitive attributes. Metrics can include but are not limited to low-risk reserves as a percentage of total reserves, product mix and features, and number of distinct product lines.

Asset Quality: Life insurers mainly invest in high-quality liquid assets, although to improve investment yields and/or match guarantees embedded in their liabilities, many companies allocate a portion of their investments to higher-risk assets. Metrics can include but are not limited to high-risk assets and goodwill & intangibles as percentages of equity, as well as investment concentrations and portfolio liquidity.

Capital Adequacy: An insurer’s capital adequacy determines the extent to which it can absorb losses stemming from business and financial risks, including from stress scenarios. Metrics can include but are not limited to adjusted shareholders’ equity as a percentage of assets, regulatory capital ratios, insurers’ own capital adequacy metrics, and output from Moody’s Capital Tool.

Profitability: An insurer’s earnings capacity, including earnings quality and sustainability, shows how readily it can meet policy and other financial obligations and generate capital internally. Metrics can include but are not limited to return on capital, return on equity, return on assets, and volatility of such returns.

Liquidity and Asset/Liability Management: A company’s asset liability management and its associated liquidity are critical risk factors in the confidence-sensitive life insurance market. Metrics can include but are not limited to liquid assets as a percentage of liquid liabilities, duration and cash flow matching, and economic and market scenario testing.

Financial Flexibility: Insurers benefit from the ability to raise capital externally for growth or acquisitions or to meet unexpected financial demands. Metrics can include but are not limited to adjusted financial leverage, total leverage, earnings coverage, and cash flow coverage, as well as holding company liquidity and access to committed credit facilities.

Other Rating Considerations: In addition to the factors discussed above, other factors such as management, enterprise risk, accounting policies and disclosures, sovereign and regulatory environment, and explicit or implicit support can affect the insurance financial strength ratings of insurance operating companies.

Instrument Notching Considerations: The ratings for debt and preferred stock instruments issued by insurance firms are generally notched down from the insurance financial strength ratings based on the issuing entity, jurisdiction, seniority, collateral, and other features of the instruments.

• American International Group, Inc.

• Hartford Financial Services Group, Inc. (The)

• Horace Mann Educators Corporation

• Kemper Corporation

The principal methodology used for the rated entity listed below was Title Insurers Methodology published in November 2019. Please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.

Title Insurers Methodology

Market Position and Brand: Market position and brand are key factors representing a company’s ability to develop and sustain competitive advantages in its chosen markets. Metrics can include but are not limited to market share and total revenue.

Product Focus and Diversification: A company’s chosen business lines have a major influence on its risk profile and creditworthiness because business classes have distinct volatility and competitive attributes. Metrics can include but are not limited to diversification of products and services and geographic diversification.

Asset Quality: Title insurers mainly invest in high-quality liquid assets, given the uncertain timing and magnitude of their liability payments, although companies often allocate a portion of their investments to higher-risk assets. Metrics can include but are not limited to high-risk assets and goodwill & intangibles as percentages of equity, as well as investment concentrations and portfolio liquidity.

Capital Adequacy: A title insurer’s capital adequacy determines the extent to which it can absorb losses stemming from business and financial risks, including from stress scenarios. Metrics can include but are not limited to underwriting leverage, regulatory capital ratios, and insurers’ own capital adequacy metrics.

Profitability: A title insurer’s earnings capacity, including earnings quality and sustainability, shows how readily it can meet policy and other financial obligations and generate capital internally through real estate market cycles. Metrics can include but are not limited to return on capital and volatility of such returns.

Reserve Adequacy: Our estimate of the redundancy or deficiency of a title insurer’s reserves helps shape our assessment of its reported earnings and capitalization. Metrics can include but are not limited to reserves as a percentage of average paid losses as well as volatility of claim payments.

Financial Flexibility: Title insurers benefit from the ability to raise capital externally for growth or acquisitions or to meet unexpected financial demands. Metrics can include but are not limited to financial leverage, earnings coverage, and cash flow coverage, as well as holding company liquidity and access to committed credit facilities.

Other Rating Considerations: In addition to the factors discussed above, other factors such as management, enterprise risk, accounting policies and disclosures, sovereign and regulatory environment, and explicit or implicit support can affect the insurance financial strength ratings of insurance operating companies.

Instrument Notching Considerations: The ratings for debt and preferred stock instruments issued by insurance firms are generally notched down from the insurance financial strength ratings based on the issuing entity, jurisdiction, seniority, collateral, and other features of the instruments.

• Old Republic International Corporation

This announcement applies only to Rated Entities with EU rated, UK rated, EU endorsed and UK endorsed ratings. Rated Entities, with Non EU rated, non UK rated, non EU endorsed and non UK endorsed ratings may be referenced herein to the extent necessary, if they are part of the same analytical unit.

Please see the Issuer page on https://ratings.moodys.com for each of the ratings covered, most updated credit rating action, rating history, and Credit Rating action Press Release including the rating rationale and factors that could lead to a rating upgrade or downgrade.

This publication does not announce a credit rating action.

For any credit ratings referenced in this publication, please see the issuer/deal page on https://ratings.moodys.com

for the most updated credit rating action information and rating history.

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Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
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