A decision by credit ratings agency Standard & Poor's to downgrade the credit ratings of five U.S.-based insurance companies should not be interpreted as a sign that their financial strength has weakened, said California Insurance Commissioner Dave Jones.
S&P reduced the ratings from AAA to AA+ because the insurers have substantial holdings in U.S. ?Treasury notes, which were downgraded Friday from AAA to AA+, Jones said in a statement released by his office Wednesday.
"The reason for S&P's downgrade of some insurers is its policy that no insurer with significant investments in U.S. securities may have a rating higher than the rating of those securities," he said.
According to Standard & Poor's, the five insurance groups are Knights of Columbus, New York Life, Northwestern Mutual, Teachers Insurance & Annuity Assn. of America (TIAA) and United Services Automobile Assn. (USAA).
Both Jones and insurance regulators in other states stressed that the downgrades do not reflect the insurers' financial health or their ability to pay claims.
"S&P's downgrade to AA+ has no impact on insurers' claims paying abilities," Jones said. He said his department "will continue to exercise strong financial oversight and carefully monitor the financial condition of the insurers."
S&P noted that the companies have "very strong financial profiles and favorable business profiles" and "maintain very strong capital and liquidity."