S&P Affirms Trans Re Zurich ‘AA’ Ratings

January 25, 2002

Standard & Poor’s has affirmed its long-term double-‘A’ counterparty credit and insurer financial strength ratings on Switzerland-based reinsurance company Trans Re Zurich (TRZ) with a stable outlook.

“The ratings on TRZ reflect the company’s core status as part of the Transatlantic Reinsurance Co. (AA/Stable/–). Additional stand-alone factors include the company’s very strong risk-adjusted capitalization and satisfactory operating performance. An offsetting factor is the company’s business position, which, although carefully targeted, is modest by global standards,” said S&P’s announcement.

“TRZ is core to its parent, Transatlantic Reinsurance Co., and benefits from being a key member of the Trans Re group’s European reinsurance network. TRZ gains significant reinsurance support from the group, and from the ultimate parent, American International Group”, S&P’ continued

It also noted the company’s very strong capital adequacy, which exceeded 250% of the required level in 2000 , according to S&P’s risk-based capital model. Offsetting this is “the comparatively small size of the capital base, which leaves capitalization potentially more vulnerable to market volatility.” s&P indicated that although “the company is small by comparison with the major global reinsurers,” it “has a carefully targeted niche strategy that reduces its exposure to competitive conditions in the global reinsurance market.”

“TRZ’s operating performance is regarded as satisfactory,” said S&P. “Underwriting performance deteriorated in line with market conditions in 1999 and 2000, but further claims from the Martin and Lothar storms meant that 2000 was worse than expected. This was compounded by a series of midsize property losses and adverse loss experience in the aviation and space accounts.”

“Operating performance is expected to improve in 2001 with a combined ratio of approximately 109%, and a further improvement in 2002. The 15% target ROE should be comfortably achieved in 2001 and 2002,” S&P concluded.

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