The Standard & Poor's downgrade of the U.S. credit rating resulted in a similar slap for 10 U.S. insurance companies that back their life insurance, disability insurance and retirement products with strong holdings in Uncle Sam.
The ratings agency lowered from AAA to AA+ the long-term credit and financial strength ratings on five U.S. insurers: Knights of Columbus, New York Life, Northwestern Mutual, Teachers Insurance and Annuity Association of America (TIAA) and United Services Automobile Association (USAA). S&P set the outlook on future ratings of these companies at negative.
While S&P affirmed its AA+ ratings on Assured Guaranty, Berkshire Hathaway, Guardian, Massachusetts Mutual and Western & Southern, it revised its outlook on ratings for these companies from stable to negative.
S&P said that while the companies maintain "very strong capital and liquidity," their significant holdings in U.S. Treasury and agency securities forced the move in light of the U.S. credit downgrade. It noted that the affinity relationships of Knights of Columbus, TIAA and USAA exposed them to additional risk from the U.S. rating downgrade.
Susan E. Voss, president of the National Association of Insurance Commissioners, or NAIC, was quick to quell public fears that might arise from the S&P actions.
"There is no impact on insurer investments in U.S. government and government-related securities from the actions recently taken by the rating agencies. Risk-based capital and asset valuation reserves are unaffected. State insurance regulators and the NAIC will consider changes to our regulatory treatment if it becomes necessary in the future," Voss said in a statement.
Northwestern Mutual president Mark Lucius said the downgrade was not unexpected. "It is entirely due to S&P's belief that financial firms like Northwestern Mutual can't have better strength ratings than the U. S. government," he said in a statement.
As a parting kick no doubt shared by the other nine affected companies -- and likely Ben Bernanke and President Barack Obama as well -- Lucius added: "We are the same exceptionally strong company today as we were yesterday. We continue to have AAA, best possible ratings from Moody's, Fitch and A.M. Best."
In theory at least, lower ratings adversely affect a company's borrowing costs.
Or is it just a lot of dinosaur dancing with little or no significance for the rest of us?
Follow me on Twitter.
Subscribe to Bankrate's AAA-rated newsletters today!