Best Affirms Members of Quanta Capital Ratings

A.M. Best Co. announced that it has affirmed the financial strength rating of “A-” (Excellent) of Bermuda-based Quanta Reinsurance Ltd. (Quanta Re) and its three strategic pooled subsidiaries: Quanta Reinsurance U.S. Ltd. (Quanta Re U.S.) (Bermuda), Quanta Specialty Lines Insurance Company (Quanta Specialty) based in Indianapolis, Ind. and Quanta Indemnity Company (Quanta Indemnity), based in Denver, Colo. Best has also assigned an issuer credit rating of “a-” to Quanta Re. The rating outlook for all companies is stable.

“All companies are wholly-owned subsidiaries of Quanta Capital Holdings Ltd.), a Bermuda-based holding company, formed in 2003,” Best noted. “Through its subsidiaries, Quanta provides specialty lines of insurance, reinsurance, risk assessment and risk consulting services on a global basis.”

Best said: “The ratings take into consideration the results reported by Quanta through September 30, 2004, (including catastrophe losses), the underlying results (excluding catastrophes) within Quanta’s three core business segments and the targeted earnings guidance and capital accumulation projections set forth by management for 2005.”

They also consider “the additional capital raised via a pooled trust preferred securities offering, which closed in the fourth quarter of 2004 (See IJ Website Dec.22).” Best noted that the dedicated capital allocated to Quanta Re’s newly formed Lloyd’s Syndicate 4000 and management’s intention to prudently manage and allocate capital in accordance with certain levels had been previously discussed with the rating agency.

“Although operating earnings in the third quarter of 2004 were adversely impacted by the Florida hurricanes, Quanta’s core earnings (excluding catastrophes) were otherwise in line with management’s expectations,” the bulletin continued. “These underlying results reflect Quanta’s technical underwriting strategy, its experienced underwriting staff and the benefits gained from commercial lines and reinsurance price firming within the United States.”

Best indicated, however, that “these positive rating factors are offset by the significant challenges and uncertainties associated with newly-formed, start-up companies, including the successful execution of its business plans and management’s ability to diversify and grow its business profitably.

“Moreover, unlike some other start-up insurers, Quanta does not have an established and well-capitalized insurance parent, or sponsor(s), capable of providing financial and/or operational support.

“Notwithstanding, the group’s financial flexibility is enhanced by its listing on the NASDAQ in May 2004 and its access to the capital markets. As with any other newly-formed organization, A.M. Best will continue to evaluate Quanta’s capitalization to ensure capital and surplus are in compliance with A.M. Best’s standards relative to the ratings.”

Topics USA Excess Surplus Reinsurance