What does the S&P credit downgrade mean for the country
and for the insurance industry? Perhaps nothing much.
BY ARTHUR D. POSTAL
WASHINGTON BUREAU CHIEF
heN s TANDArD & Poor’s Do WNGrADeD The U.s. sovereIGN
credit rating on August 5, the move came as an unwelcome surprise
for many—especially those federal legislators on whom the downgrade
was largely blamed. citing an inability to reach debt ceiling consensus,
s&P downgraded the country’s sovereign credit rating for the first time,
But s&P then went a step further and subsequently downgraded the credit rating of
certain mutual insurers from AAA to AA+, just one day after downgrading the U.s. credit
rating from AAA to AA+.
Insurers whose ratings were downgraded to ‘AA+’ from ‘AAA’ on its long-term counter-party credit and financial strength included Knights of columbus, New york Life, Northwestern Mutual, Teachers Insurance & Annuity Association of America (TIAA), and the
United services Automobile Association (UsAA).
The outlooks on the ratings for all of these companies were changed to negative. standard & Poor’s also said that it lowered the ratings on approximately $17 billion of securities
issued by New york Life, Northwestern Mutual, TIAA, UsAA, and their affiliates. The reason cited for the various downgrades was that these insurers had invested heavily in U.s.
Treasuries and their business was heavily concentrated in the United states.
At the same time, standard & Poor’s affirmed the ‘AA+’ ratings on the members of
five other insurance groups—Assured Guaranty, Berkshire hathaway, Guardian, Massachusetts Mutual, and Western & southern—and revised the outlooks on ratings on these
companies to negative from stable.