A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a+” of Lloyd’s Syndicate 1225, which is managed by AEGIS Managing Agency Limited. The outlook for both ratings remains stable. The ratings of syndicate 1225 “reflect the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates,” said Best. In addition, the syndicate “benefits from its association with Associated Electric & Gas Insurance Services Limited (AEGIS), which is the ultimate parent company of its sole capital provider, AEGIS Electric & Gas International Services Limited. The syndicate’s prospective earnings are expected to remain volatile due to the exposure of its energy and utility accounts to catastrophe losses.” However, Best added: “This business as a proportion of total premium income has been reduced in recent years as the syndicate has diversified into other classes. In addition, other measures have been taken to moderate results volatility, including reducing the syndicate’s maximum line size on energy accounts and in 2011 significantly reducing the energy onshore casualty portfolio. In 2011, the total energy portfolio is expected to account for less than 20 percent of the syndicate’s gross written premiums, down from 28 percent in 2010.” In addition Best noted that the “combined ratio is expected to deteriorate in 2011 from the 90 percent achieved in 2010, reflecting exposure to catastrophe losses in the first quarter of the year and the absence of the substantial reserve release that supported the 2010 result. Despite a number of large single risk losses and the impact of the Chilean, Haitian and New Zealand earthquakes, there was a small improvement in the syndicate’s underwriting result in 2010 to £27.9 million [$45.5 million] from £25.7 million [$41.9 million] in 2009. Pre-tax profit fell to £47.2 million [$76.95 million] from £52.1 million [$84.95 million], due to lower investment returns.” Best described the syndicate as maintaining “a good business profile in its energy and utility lines, supported by its association with AEGIS. In addition, the syndicate continues to improve the diversification of its portfolio. In 2011, livestock business was added to its non-energy portfolio, which principally comprises non-marine property, marine and international casualty, war and terrorism and property treaty reinsurance.”
A.M. Best Co. has affirmed the financial strength rating of ‘B+’ (Good) and the issuer credit rating of “bbb-” of New Zealand’s Pacific International Insurance Limited (PII). The outlook for both ratings is positive. Best said the ratings reflect PII’s “good risk-adjusted capitalization, consistent operating profitability and corresponding surplus accumulation. PII’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), strengthened in 2010, reflecting the company’s underwriting profitability for the year. The increase in BCAR was dampened by an increase in asset risks associated with shareholders’ loans. PII’s risk-adjusted capitalization is projected to increase moderately in the next few years.” In addition Best noted that the company’s operating profitability was “supported by a stable stream of investment income, although this decreased substantially in 2010 due to the lower interest rate environment. A focus on stronger underwriting as well as on claims settlement rather than litigation halted the negative slide in technical income, and PII enjoyed a strong profit in 2010. PII’s capital and surplus has increased by 85 percent since 2006, while gross premiums written generally have been declining, leading to an improved risk-adjusted capitalization over the past five years.” As offsetting factors Best cited the company’s “volatile underwriting results and small, relatively long-tailed underwriting book. PII’s underwriting results fluctuated from a loss of A$346,000 [US$363,744] to a profit of A$5.3 million [US$5.575 million] in the past five years. The company’s tightened underwriting margin reflects a higher claims trend from its indemnity business, while its expense ratio has been increasing due to lower premium volumes and higher compliance costs. Having a short operating history means that losses may not be fully developed, while a small and specialized underwriting book indicates possible volatile underwriting results. As observed in PII’s 2008 and 2009 underwriting result, the small and specialized underwriting book gives rise to unforeseen underwriting volatility embedded in the company’s book of business. As losses from past year business may not have fully developed, the company’s ultimate profitability remains uncertain.”
A.M. Best Europe – Rating Services Limited has downgraded the financial strength rating to ‘C+’ (Marginal) from ‘C++’ (Marginal) and the issuer credit rating to “b-” from “b” of Nigeria’s International Energy Insurance plc (IEI), and has removed the ratings from under review with negative implications and assigned a negative outlook. Best concurrently withdrew the ratings at the company’s request and assigned an NR-4 (Company Request) to the FSR and an “nr” to the ICR. Best explained that the downgrading of the ratings “reflects uncertainties over the future divestment of subsidiary companies and a lack of information regarding the 2010 financial year. Although IEI is looking to divest its subsidiary operations, as far as A.M. Best is aware, these operations are still a part of the group and are in a negative net worth position. Offsetting this is a fair level of risk-adjusted capitalization.”
A.M. Best Europe – Rating Services Limited has revised the outlook to negative from stable and affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of Flagstone Reinsurance Africa Limited, which is based in South Africa. Best said the ratings reflect the company’s “strong risk-adjusted capitalization as well as the explicit support provided by its parent, Flagstone Reassurance Suisse SA (Flagstone Suisse). As such, Flagstone Re Africa has followed the rating change of the parent to negative from stable. Best added that it believes that the “support from the Flagstone group is critical to the rating and operating performance of Flagstone Re Africa. This comes in the form of an explicit guarantee from Flagstone Suisse as well as a 75 percent quota share agreement. In addition, Flagstone Re Africa benefits from the group’s technical expertise in terms of underwriting, modeling, investment and reserving.” Best also said it believes that “Flagstone Suisse’s financial flexibility and profitability has been adversely affected by a series of catastrophic losses since January this year. As the impact of these events places pressure on the Flagstone group, A.M. Best considers that the financial support provided to Flagstone Re Africa has been weakened with a corresponding impact on the subsidiary’s rating outlook.”
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