A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a+” of Bermuda-based MS Frontier Reinsurance Ltd., both with stable outlooks. MS Frontier is a wholly owned subsidiary of Mitsui Sumitomo Insurance Company, Limited (MSI), and MSI is a subsidiary of MS&AD Insurance Group Holdings, Inc. (MS&AD). The ratings reflect MS Frontier’s “solid underwriting performance during a period of severe global catastrophes,” Best noted. In addition, the ratings are “enhanced from the global presence, financial support and balance sheet strength of its ultimate parent, MS&AD.” Best also indicated that MS Frontier “maintains an excellent level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR) model, and the company has conservative enterprise risk management practices. MS Frontier continues to be a strategic insurance vehicle for MSI, designed to be a part of the group’s geographical portfolio optimization, risk diversification and overseas business expansion.” As partial offsetting factors Best cited MS Frontier’s “exposure to low frequency, high severity events, which could significantly reduce capital given the company’s main focus on property catastrophe reinsurance. In addition, the current property catastrophe pricing environment has shown signs of improvement, but remains competitive. If pricing deteriorates into the January 1, 2012 renewals it could pressure MS Frontier’s profit margins.”
A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of ‘A ‘(Excellent) and issuer credit rating of “a” of Abu Dhabi National Insurance Company (ADNIC), based in the United Arab Emirates. The outlook for both ratings remains stable. Best said the ratings reflect ADNIC’s “strong and improving business position, its strong financial performance and superior risk-adjusted capitalization. ADNIC remains the second-largest insurer in the United Arab Emirates with a premiums income of AED 1.77 billion ($481.9 million) in 2010, a 14 percent larger premiums base than the previous year.” Best added that it believes that ADNIC “is likely to experience growth rates of around 15 percent in the coming two years as it continues the company’s expansion of its distribution network and explores further opportunities from personal lines of business. Furthermore, ADNIC maintains its strategy of increasing business retention, which is commensurate with its level of risk-adjusted capitalization.” Best described ADNIC’s financial performance as “robust with a combined ratio of 83.2 percent in 2010, which despite increasing, remains at a very good level.” Best also explained that it “expects some further deterioration of underwriting profitability up to a combined ratio of 90 percent in the next two years. This deterioration would be due to both an increase in premiums retention potentially leading to higher loss ratios and the reduction in reinsurance profit commissions, which have historically been keeping the expense ratio at very low levels. ADNIC’s conservative investment strategy (with a greater focus on cash deposits) provides additional stability to overall earnings and supports the capital base from the current financial markets’ volatility. ADNIC’s superior capital position driven by historical earnings retention, a very good reinsurance program and a low investment risk profile is expected to remain supportive of the current business expansion plans in the near future.”
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