A.M. Best Removes From Under Review And Affirms Ratings Of Key Life Insurance Entities Of ING U.S., Inc.

A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of the key life insurance entities of ING U.S., Inc. (Delaware), the holding company for the U.S. operations of ING Groep N.V. (ING Group) (Netherlands) [NYSE: ING]. The U.S. operations of ING Group are collectively known as ING USA. Additionally, A.M. Best has removed from under review with negative implications and affirmed the debt and program ratings of “a” of ING Security Life Institutional Funding. The outlook assigned to these ratings is stable.

Concurrently, A.M. Best has assigned an ICR of “bbb” and a debt rating of “bbb” to ING U.S., Inc. and its recent issuance of $850 million of 5.50% 10-year senior unsecured notes. A.M. Best also has affirmed the FSR of A- (Excellent) and ICR of “a-” of Midwestern United Life Insurance Company (Atlanta, GA). The outlook for these ratings is stable. (See below for a detailed listing of the companies and ratings.)

The ratings recognize ING USA’s strong market position in the life insurance and retirement markets, profitable operating results and improved levels of risk-adjusted capital. Although historically supported by its ultimate parent, ING Group, A.M. Best notes that ING Group has a planned initial public offering (IPO) of its U.S. operations within the next 12-18 months. Additionally, the assigned ratings reflect A.M. Best’s expected completion of this process, which will be evidence of ING USA’s successful capital initiatives. The new senior notes, together with the proceeds from the anticipated IPO of the U.S. life/annuity operations, should facilitate ING USA achieving its targeted independent capital structure, with financial leverage and interest coverage expected to fall within A.M. Best’s guidelines for its current ratings. The proceeds from the notes will be used for general corporate purposes, including the repayment of outstanding bank borrowings.

Partially offsetting these positive rating factors is ING USA’s ongoing exposure to both equity markets and interest rates through product guarantees. Although spread compression remains a concern in the current low rate environment, the potential for rising interest rates could significantly impact ING USA’s capital if rates were to spike. Specific to the legacy block of variable annuities (VAs), which possesses both guaranteed death benefits and guaranteed living benefits, the group remains susceptible to potentially sizeable reserve increases in volatile equity markets. A.M. Best notes ING USA’s strong risk management capabilities utilized to hedge VAs, but also recognizes the relative uncertainty surrounding future policyholder behavior in this line. Also of note is ING USA’s portfolio of below investment grade structured securities and commercial mortgage loans. However, at this time, A.M. Best believes the investment portfolio has been meaningfully de-risked over the past few years and future impairments should remain manageable. The inherent uncertainty around the timing and execution of the IPO process could negatively affect the group’s business profile with respect to products, customers, distribution and market positions, in addition to having an unfavorable effect on leverage and interest coverage metrics.

Additional positive rating actions for ING USA are not anticipated in the near term. However, the following key factors could lead to negative rating actions: further delays and/or the inability to successfully execute on the IPO strategy, leading to a negative impact on its business profile; significant decline in risk-adjusted capital; additional material adjustments to reserves on the legacy variable annuity book of business, heightened financial leverage; and lower interest coverage ratios.

The FSR of A (Excellent) and ICRs of “a” have been affirmed for the following ING USA life/health insurance entities:
  • 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 following debt rating has been affirmed:

ING Security Life Institutional Funding—program rating of “a”-- “a” on all outstanding notes issued under the program

The methodology used in determining these ratings is Best’s Credit Rating Methodology , which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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