A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of the property/casualty subsidiaries of the holding company, XL Group plc, which is based in Ireland, and led by XL Insurance (Bermuda) Ltd.
Best also affirmed the ICRs of “bbb” of XL and XLIT Ltd., which are based in the Cayman Islands, as well as all debt ratings of XLIT Ltd.
The outlook for all of the ratings is stable.
The rating affirmations reflect the organization’s “excellent risk-based capitalization, strong worldwide market presence and the completed de-risking of the group’s investment portfolio,” Best explained. “XL subsidiaries’ property/casualty operating results have been profitable through the first six months of 2012, with a combined ratio of 93.0 percent. The group averaged a favorable combined ratio of 95.9 percent for the previous five years.”
Best also indicated that the XL management team “has implemented strategies that support and promote an enhanced risk management program and a continuing focus on underwriting as the key component of the group’s business approach.
“Management’s focus on its core underwriting strengths has been exhibited by the addition of a substantial number of new senior underwriters. Furthermore, as a result of XL’s completed de-risking of its investment portfolio, the organization has successfully reduced the level of market volatility in its investment results.
“XL’s debt-to-capital ratio is expected to remain in the 15 percent-25 percent range as capital is anticipated to be enhanced by strong earnings. The fixed charge coverage has stabilized and is expected to remain comparable with the current level over the near term.”
Best said that “positive rating actions could occur if over the next several years XL exhibits consistency in its underwriting and net earnings in line with other comparably rated peers, along with retained earnings growth.
“Negative rating actions could occur if the organization’s operating performance is consistently below the market by a significant margin for several years, or if capital erosion due to operating performance or investment volatility exceeds A.M. Best’s expectations.”
Best summarized the companies including in the ratings affirmations as follows:
The FSR of A (Excellent) and ICRs of “a” have been affirmed for the following subsidiaries of XL Group plc:
— XL Re Ltd
— Indian Harbor Insurance Company
— Greenwich Insurance Company
— XL Insurance Company of New York, Inc.
— XL Insurance America, Inc.
— XL Select Insurance Company
— XL Reinsurance America Inc.
— XL Specialty Insurance Company
— XL Insurance (Bermuda) Ltd
— XL Re Latin America Ltd
— XL Insurance Company Limited
— XL Re Europe Limited
— XL Insurance Switzerland Ltd
The following debt ratings have been affirmed:
— “bbb” on $600 million 5.25 percent senior unsecured notes, due 2014
— “bbb” on $350 million 6.375 percent senior unsecured bonds, due 2024
— “bbb” on $325 million 6.25 percent senior unsecured notes, due 2027
— “bbb” on $400 million 5.75 percent senior unsecured notes due 2021
— “bb+” on $1.0 billion Series E non-cumulative preference shares, redeemable 2017 –“bb+” on $350 million Series D non-cumulative preference shares
The following indicative ratings on shelf securities have been affirmed:
— “bbb” on senior unsecured
— “bbb-” on subordinated
— “bb+” on preferred stock
Source: A.M. Best