Ratings Recap: Talanx Re, Nissan Global, Harmony, JEVCO

November 16, 2012

A.M. Best Europe – Rating Services Limited has assigned a financial strength rating of ‘A’ (Excellent) and an issuer credit rating of “a” to Talanx Reinsurance (Ireland) Ltd., both with stable outlooks. Best said the “ratings of Talanx Re reflect its strong risk-adjusted capitalization, good expected operating performance and the support the company receives from its parent company, Talanx AG. Talanx Re is a reinsurance company fully owned by Talanx AG. The company has been operating since 2009, and its sole activity consists of the transaction of reinsurance business with the Talanx Primary Group. Talanx Re’s purpose is to optimize the group’s reinsurance structure and manage capital more efficiently. It is not expected to write third party business prospectively.” Best added that “Talanx Re benefits from strong risk-adjusted capitalization, with capital and surplus increasing by 18 percent to €60.5 million [$77 million] at year-end 2011. The company’s premium income is expected to grow strongly in the next few years, from €82.7 million [$105.4 million] in 2011 to €250-275 million [$318.5 to $350 million] in 2014. This growth is expected to be supported by a capital increase of €60 million [$76.7 million] at year-end 2012. Future capital levels are expected to be supported by solid retained earnings.” Best added that it “expects Talanx Re to post good financial results going forward in line with the overall group’s performance. The company reported a profit before tax of €10.2 million [$13 million] in 2011 (2010:€8 thousand [$10,192]), with the combined ratio decreasing to 95.9 percent (2010: 100.5 percent) as a result of improved development on the motor book. There are currently no upwards or downwards pressures on Talanx Re’s ratings.

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Bermuda-based Nissan Global Reinsurance, Ltd. (NGRe), both with stable outlooks. “The ratings reflect NGRe’s strong capitalization and conservative operating strategy,” said Best. They also consider NGRe’s” critical role and favorable profile as part of the Nissan Motor Co. Ltd.,” as well as its “excellent operating performance since its inception in 2005.” As partial offsetting factors Best cited NGRe’s significant exposures “to product liability, property and marine cargo claims. Additionally, the recent deterioration in the financial markets and the decline in the profitability of automakers has had some impact on premium volumes, although investment results have not been significantly affected. Furthermore, NGRe is expecting a reversal of those trends in the current year.” Best also pointed out that “NGRe is a single parent captive of Nissan, one of the largest automakers in the world. NGRe operates two distinctive lines of business: (1) global property/casualty programs for Nissan, which include global property (United States, Japan, Europe, Mexico and South Africa), U.S. workers’ compensation, U.S. and Japan product liability and marine transport and (2) a global platform for extended service contract business. NGRe benefits from the group’s extensive risk management and loss control programs. NGRe operates at conservative underwriting leverage levels; however, it provides coverages with large limits, and as such, its gross exposures per loss occurrence are elevated.” Best added that it nevertheless “recognizes the quality of the substantial financial resources and support available to the captive. NGRe’s ratings are not expected to be upgraded, nor is its outlook expected to be revised within the next 12-24 months, as its operating performance and capital position already have been considered in the ratings process” best did say it “could downgrade NGRe’s ratings and/or revise its outlook if its Best’s Capital Adequacy Ratio (BCAR) score declines, operating performance and risk profile deteriorate, its insured losses deplete capital and/or significant changes and turnover occur in its management team, risk management controls and tolerances.”

A.M. Best Co. has affirmed the financial strength rating of ‘B+’ (Good) and issuer credit rating of “bbb-” of Barbados-based Harmony General Insurance Company Ltd., both with stable outlooks. Best said the “ratings reflect Harmony’s solid risk-adjusted capitalization, overall earnings in recent years and conservative reinsurance program. Harmony is owned by ABH Holdings Ltd., a privately owned, Barbados-domiciled holding company. Harmony has reported overall earnings in recent years, which has enabled it to enhance its capitalization through retention of earnings. Harmony continues to maintain solid risk-adjusted capitalization for its current business profile. Although the company operates in a region that has historically been less prone to catastrophic events, Harmony maintains a very conservative reinsurance program to limit its exposure to natural disasters.” As partial offsetting factors Best cited “the geographic concentration of Harmony’s business in an increasingly competitive domestic market, its reliance on reinsurance as a catastrophe risk mitigation strategy and its limited financial flexibility as a result of its private ownership structure.” Best also indicated that while the outlook is stable, “factors that could contribute to rating enhancement include consistent improvement in Harmony’s underwriting performance, overall profitability and an upgrade in the Barbados country risk tier rating. Factors that may lead to negative rating actions include a sustained decline in the company’s underwriting profitability, significant deterioration in its risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR) and a downgrade in the Barbados country risk tier rating.”

A.M. Best Co. has removed from under review with positive implications and upgraded the financial strength rating to ‘A’ (Excellent) from ‘B++’ (Good) and the issuer credit rating to “a” from “bbb+” of JEVCO Insurance Company, which is based in Quebec, Canada, and has assigned a positive outlook to both ratings. Best explained that the company” is an insurance subsidiary of the ultimate parent company, Intact Financial Corporation (IFC). The rating upgrades for JEVCO reflect the implicit and explicit support it receives from IFC, the largest property/casualty provider in the Canadian marketplace. The positive outlook reflects the expectation and intention of IFC to include JEVCO in its participation agreement, an internal reinsurance treaty arrangement.”

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