Ratings Recap: Guardian, Central Re

August 4, 2014

A.M. Best has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit ratings (ICR) of “a-” of Guardian Life of the Caribbean Limited (GLOC) and Guardian General Insurance Limited (GGIL). Best also affirmed the ICR of “bbb-” of Guardian Holdings Limited (GHL), a publicly traded holding company and ultimate parent of GLOC and GGIL. The outlook for all ratings is stable. GHL is listed on the Trinidad and Tobago stock exchange. All companies are domiciled in Port of Spain, Trinidad. Best said the ratings’ affirmation of GLOC and GGIL “reflect GHL’s fairly stable leverage position, consolidated balance sheet strength and premium growth over the past several years. The consistent profitability of GLOC and GGIL, which are core insurance subsidiaries of GHL, enhances the overall strength of GHL’s balance sheet and debt servicing capabilities.” Best noted, however, that “the outstanding level of financial leverage at GHL remains somewhat elevated relative to total capitalization. Moreover, GHL’s exposure to Jamaica through its life and non-life operations remains an area of concern.” Best said the ratings of GLOC “acknowledge its strategic position within the GHL group, strong competitive position in the Trinidad and Tobago markets, consistently positive operating results from its life and pension and health insurance lines and its adequate level of risk-adjusted capitalization.” As offsetting factors Best cited “GLOC’s moderately increased insurance benefits and claims expenses, the impact of continuing volatility in the local, regional and global equity markets and the competitive and mature nature of the Trinidad and Tobago insurance marketplace. The ratings of GGIL recognize its leading regional market presence, historically profitable operating performance and more than adequate risk-adjusted capitalization. Additionally, GGIL’s strong return metrics and underwriting performance compares favorably with its property/casualty Caribbean peers.” As offsetting factors Best cited “GGIL’s exposure to catastrophic events in the region, the company’s reliance on reinsurance to protect its earnings and surplus and the increasingly competitive regional markets in which GGIL operates.” In conclusion Best said: “Positive rating movement is unlikely in the near term as all key financial metrics are reflected in the current ratings. Key factors that could result in negative rating actions include decreased risk-adjusted capitalization, a deteriorated financial condition of the ultimate parent company or increased Jamaican exposure through further acquisitions or organic growth.”

A.M. Best has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a” of Taiwan’s Central Reinsurance Corporation, both with stable outlooks. Best said the rating affirmations reflect the company’s “adequate risk-adjusted capitalization, driven by the continued retention of operating earnings, and its long-established leading position in the non-life and life domestic reinsurance market in Taiwan.” Best also noted that “Central Re’s positive operating results were derived from stabilization following the Thailand flood losses, along with the absence of severe catastrophic losses in 2013. Furthermore, the robust growth in yearly renewable-term (YRT) life business contributed favorably to underwriting results during the year. The company also continues to achieve positive investment return under its conservative investment strategy, in which the weighting of fixed income investments has gradually increased over the past few years.” As a partial offsetting factor Best cited the “challenges Central Re faces in business expansion amid an abundance of capacity currently available in the reinsurance market. Stagnant growth in the domestic market has caused direct insurers to increase their premium retention and reduce general reinsurance demand. The company’s risk-adjusted capitalization continues to be exposed to potential material event losses over the medium term given its moderate level of capital buffer.” In conclusion Best said that “while the outlook for Central Re’s ratings is stable, negative rating actions could occur if operating results exhibit continued downward pressure or prospective risk-adjusted capitalization materially deteriorates.”

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