Best Affirms St. Paul International ‘A’ Rating

A.M. Best Co. announced that it has affirmed the “A” (Excellent) financial strength rating of London-based St Paul International Insurance Company Limited, has removed the rating from under review and assigned a stable outlook.

“The rating is based on St. Paul International’s improving risk-adjusted capitalisation and underwriting performance and strong niche business position,” said Best. “Furthermore, the rating reflects the company’s strategic importance to The St. Paul Travelers Companies Inc. (SPTC) and the explicit support provided by a parental guarantee. An offsetting factor continues to be the potential exposure to the run-off of certain – primarily discontinued – business lines.”

Commenting on that strategic importance, Best indicated that “although a relatively small part of the total SPTC organisation, St Paul International is fully integrated into the group’s commercial insurance strategy, writing a complimentary book in the UK and Ireland. The group-wide restructuring initiated in late 2001 has resulted in the company achieving a significant turnaround in operating performance, in line with expectations of its parent.”

The rating agency also said it “anticipates further improvement in the company’s capital position through the retention of earnings during 2004. Expected performance is in excess of net profits of GBP 25.7 million (USD 45.5 million) reported in 2003.

Increased selectivity in 2004 and the run-off of certain business lines (construction and med-mal in particular) and markets (excluding the UK and Ireland) continues to enhance St Paul International’s risk profile.”

Best also noted that a “continued focus on core business has led to a further improvement in underwriting performance in 2003, with a reduction in the combined ratio of 12.2 percentage points to 95.6 percent.” Best expects a further reduction in 2004 “as poor performing lines are run-off, despite further potential exposure following deterioration in 2003 relating to both continuing and discontinued business.”

The report concluded that “St Paul International benefits from the globally recognised St Paul brand and reputation. The company has secured a significant market share in its core commercial specialty business lines, which include solicitors’ professional indemnity, transport, the public sector, automotive and technology.”