A.M. Best Co. has affirmed the financial strength rating of ‘B++’ (Good) and issuer credit rating of “bbb” of China Taiping Insurance (NZ) Limited (CTINZ), both with stable outlooks. Best said the ratings reflect CTINZ’s “adequate risk-adjusted capitalization, effective reinsurance arrangements and parental support.” Best also noted that it recognizes the company’s “continuing efforts to tightly control growth in underwriting leverage as it emphasizes stability in underwriting risk and profitability over growth in premium revenue. CTINZ’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, remains supportive of its current ratings. Each of the successive earthquake events from September 2010 to June 2011 was effectively absorbed by the company’s reinsurance program,” Best continued. “The resulting increase in capital requirements due to elevated reinsurance recoverables has been offset by parental capital support provided during 2011. Moderate growth in underwriting leverage is expected to limit growth in underwriting risk, further supporting the company’s risk-adjusted capitalization going forward.” As partial offsetting factors Best cited CTINZ’s “higher reinsurance recoverable balances, potentially higher reinsurance deductibles and reinstatement costs and lower anticipated profitability for 2012. The build-up of reinsurance recoverables since September 2010 will likely result in significantly higher risk charges.” The rating agency also noted that the “strain of these on CTINZ’s risk-adjusted capitalization is significantly reduced by parental capital support. Like many of its peers, CTINZ faces higher reinsurance costs and higher deductibles following the catastrophe events of the past 14 months. Given the company’s tight control on growing its book of business, it is expected that it will take time before higher costs are offset by higher net earned premiums. Higher deductibles could lead to higher underwriting volatility in catastrophe scenarios.”
A.M. Best Co. has maintained the under review with negative implications status of the financial strength rating (FSR) of ‘B++’ (Good) and issuer credit rating (ICR) of “bbb” of Ansvar Insurance Limited (New Zealand). Best explained that it had taken the rating action following the announcement that Ansvar New Zealand has been placed into run off by its Board of Directors., Best noted that on September 28, 2011 it had downgraded Ansvar New Zealand’s FSR to ‘B++’ (Good) from ‘A-‘(Excellent) and ICR to “bbb” from “a-” and placed both ratings under review with negative implications, “as the company’s risk-adjusted capitalization was weakened by significantly higher levels of reinsurance recoverables and the impact of multiple reinsurance deductibles following the Christchurch earthquakes between September 2010 and June 2011.” The ratings remained under review while Ansvar New Zealand, its group parent, the UK-based Ecclesiastical Insurance Office plc, and the direct parent, Ansvar Insurance Limited (Australia), were in significant discussions regarding its capital and operational aspects. As more concrete details on these aspects emerge following Ansvar New Zealand’s most recent announcement, Best said it would “revisit the company’s ratings.”
A.M. Best Europe – Rating Services Limited has assigned a financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” to Schweizerische National-Versicherungs-Gesellschaft AG (Nationale Suisse), both with stable outlooks. The ratings of Nationale Suisse reflect its “strong risk-adjusted capitalization and good historic and prospective financial performance,” said Best. The ratings also take into account “the company’s evolving business profile.”Best added that it believes “Nationale Suisse’s prospective risk-adjusted capitalization will remain strong, taking into account the company’s growth plans and relatively low risk profile. The company aims to protect its capital base by using prudent underwriting limits and a comprehensive reinsurance program. Nationale Suisse has historically paid out between a third and half of its earnings in dividends, which should allow for sufficient earnings retention to support its future organic growth. The company is listed on the SIX Swiss Exchange and benefits from strong financial flexibility, while its financial leverage remains low.” Best said it “expects Nationale Suisse to maintain its disciplined underwriting approach, with the combined ratio likely to be in the mid 90 range at year-end 2011. The company has a manageable exposure to European peripheral debt at CHF 333 million [$359 million] (or 6 percent of its total assets) at half-year 2011. Nationale Suisse has a strong business profile in its domestic market where it ranks among the top 10 players. In addition, the organization has several European subsidiaries and is expanding its international presence in Latin America and Asia. In recent years, Nationale Suisse has been reviewing its strategy leading to a refocusing on its specialty lines business (which comprises engineering, marine, art, credit life, travel and direct insurance) as well as differentiated retail/SME business with focused target client groups. Concurrently, Nationale Suisse has decided to realign its life business towards individual life products and has exited the group life business in Switzerland where market conditions remain challenging for smaller players.” Best has forecast that overall premium income for 2011 will be “roughly CHF 1.5 billion [$1.617 billion].” Best also indicated that it “expects the group’s premium income to continue increasing by approximately 5 percent (in original currencies) over the next couple of years, supported by the specialty lines business. At half-year 2011, this book represented one third of the company’s gross premiums (up 28 percent to CHF 294 million [$317 million]).”
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