A.M. Best expects that in the short term, there will be an unfavorable impact to U.S. profitability due to losses arising from the payment of a $560 million negative ceding commission, the write-off of deferred tax assets and a mortality adjustment to reduce deferred acquisition costs. In addition, the transaction has been structured such that ING will continue to 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 associated with term life insurance. ING will maintain these XXX collateral positions until Scottish Re can arrange alternative financing solutions to support the XXX reserves associated with this transaction, at which time ING's letters of credit will no longer be needed. A.M. Best views the exposure to maintaining this contingent liability as a potential call on the capital of ING, albeit unlikely, but notes that the transaction has been structured to provide incentives to facilitate Scottish Re's eventual assumption of this liability.
ING's plan to exit this business is part of its overall strategic plan to shed underperforming businesses, improve its operating returns and effectively deploy its capital. A.M. Best recognizes the strategic benefits of the transaction, which will improve ING's long-term operating performance, reduce future earnings volatility and refine its overall business profile in the U.S. asset accumulation and asset protection marketplace.
ING USA's ratings currently carry a negative outlook, which reflects A.M. Best's view that, through year-end 2003, the U.S. group's overall capitalization -- on both a risk-adjusted and absolute basis -- and its operating performance are somewhat below expectations for an A+ (Superior)-rated company. During 2004, ING USA exhibited improvement in operating returns and strong sales growth, 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 transaction. A.M. Best plans to meet with management in the near future and expects the transaction to close by year-end 2004, subject to regulatory approvals.
The financial strength rating of A+ (Superior) has been placed under review with negative implications for the following companies:
-- ING Insurance Company of America
-- ING Life Insurance and Annuity Company
-- ING USA Annuity and Life Insurance Company
-- ReliaStar Life Insurance Company
-- ReliaStar Life Insurance Company of New York
-- Security Life of Denver Insurance Company
The financial strength rating of A (Excellent) has been placed under review with negative implications for the following companies:
-- Life Insurance Company of Georgia
-- Midwestern United Life Insurance Company
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com. CONTACT: A.M. Best Co. Public Relations: Jim Peavy, 908-439-2200, ext. 5644 james.peavy@ambest.com or Rachelle Striegel, 908-439-2200, ext. 5378 rachelle.striegel@ambest.com or Analysts: Rosemarie Mirabella, 908