A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of Bermuda-based Argo Re Ltd. and its subsidiaries. Best also affirmed the ICR and debt ratings of “bbb” of the parent holding company, Argo Group International Holdings, Ltd., also domiciled in Bermuda.
In addition Best has affirmed the ICR of “bbb” and the debt rating of “bbb” on $143.75 million 6.5 percent senior unsecured notes due 2042 of Argo Group US, Inc., of San Antonio, Texas, which are fully and unconditionally guaranteed by the Argo Group.
The outlook for all ratings is stable.
The rating affirmations reflect Argo Re’s “solid overall capitalization, management’s product expertise in niche focus areas, historically strong operating performance and favorable reserve development,” Best explained.
“The ratings also consider Argo Group’s profitability in 2012 and in the first half of 2013, its conservative financial leverage (total debt-to-total capital) and the financial flexibility that Argo Re derives from Argo Group.”
Best said that over the near term, it “expects that Argo Re’s results should continue to be positively influenced by actions management has undertaken to reduce its worldwide property exposure and improve overall operational efficiencies.”
As a partial offsetting factor Best cited “the execution risk associated with Argo Group’s expansion into new territories such as Brazil.” Best added that it recognizes that management has been addressing this risk and that the integration of acquisitions and re-engineering of related businesses is complete. Management’s ability to continue to execute on this strategy without significantly disrupting its current operations will be considered in Best’s future rating evaluations.
“Additional offsetting rating factors include competitive pressures, low new money investment yields, the effects from weak economic conditions and Argo Group’s elevated expense structure.”
In conclusion Best said it “believes that Argo Re and its subsidiaries are well positioned at their current rating levels. Key drivers that could lead to downward rating movement include material deterioration in the organization’s underwriting and/or operating performance, material adverse loss reserve development and/or a material decline in risk-adjusted capital.
Best summarized the rating actions as follows:
The FSR of ‘A’ (Excellent) and ICRs of “a” have been affirmed for Argo Re Ltd. and its following subsidiaries:
•ArgoGlobal SE
•Argonaut Great Central Insurance Company
•Argonaut Insurance Company
•Argonaut Limited Risk Insurance Company
•Argonaut-Midwest Insurance Company
•Argonaut-Southwest Insurance Company
•Colony Insurance Company
•Colony National Insurance Company
•Colony Specialty Insurance Company
•Rockwood Casualty Insurance Company
•Select Markets Insurance Company
•Somerset Casualty Insurance Company
The following indicative debt ratings available under various shelf registrations have been affirmed:
Argo Group International Holdings, Ltd.—
— “bbb” on senior unsecured debt
— “bbb-” on subordinated debt
— “bb+” on preferred stock
Argo Group US, Inc.—
— “bbb” on senior unsecured debt
— “bbb-” on subordinated debt
Argo Group Statutory Trust—
— “bb+” on preferred stock
Source: A.M. Best
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