Ratings Recap: AXIS (notes), Jasindo

March 23, 2010

A.M. Best Co. has assigned a debt rating of “bbb+” to the recently issued $500 million 5.875 percent senior unsecured notes due 2020 of Axis Specialty Finance LLC. The senior notes are unconditionally and irrevocably guaranteed by Bermuda-based Axis Capital Holdings Limited, and the assigned outlook is stable. The proceeds from the debt offering will be used for general corporate purposes, which may include the repurchase of common shares. The debt-to-adjusted capital ratio and fixed charge coverage remain comfortably within the range that is commensurate with the assigned rating for Axis. Axis is a diversified specialty insurance and reinsurance company with operating subsidiaries in Bermuda, Europe and the United States. As of December 31, 2009, reported GAAP shareholders’ equity was slightly over $5.5 billion.

A.M. Best Co. has assigned a debt rating of “bbb+” to the recently issued $500 million 5.875 percent senior unsecured notes due 2020 of Axis Specialty Finance LLC. The senior notes are unconditionally and irrevocably guaranteed by Bermuda-based Axis Capital Holdings Limited, and the assigned outlook is stable. The proceeds from the debt offering will be used for general corporate purposes, which may include the repurchase of common shares. The debt-to-adjusted capital ratio and fixed charge coverage remain comfortably within the range that is commensurate with the assigned rating for Axis. Axis is a diversified specialty insurance and reinsurance company with operating subsidiaries in Bermuda, Europe and the United States. As of December 31, 2009, reported GAAP shareholders’ equity was slightly over $5.5 billion.

A.M. Best Co. has affirmed the financial strength rating of “B++” (Good) and issuer credit rating of “bbb” of Indonesia’s PT Asuransi Jasa Indonesia (Persero) (Jasindo), both with stable outlooks. The ratings reflect “Jasindo’s long operating history and strong market profile in Indonesia as the second largest non-life player in 2008,” said Best. “The ratings also acknowledge the company’s more disciplined underwriting practice, continued improvement in its expense ratio and sound liquidity.” Best also noted that Jasindo has become “more selective in undertaking larger risk businesses and has been more prudent with its pricing strategy since 2008. The company’s more stringent underwriting approach has translated into a better net loss ratio, standing at 47 percent in 2008 compared to 53 percent in 2007. Although Jasindo’s expense ratio remains high (relative to that of its Asian peers), it has trended downward from 49 percent in 2007 to 44 percent in 2008, contributing to an improvement in its combined ratio from 101.9 percent in 2007 to 90.8 percent in 2008. In addition, with an allocation of approximately 34 percent of the company’s total assets in cash and time deposits, Jasindo maintains a sound level of liquidity to absorb potential claims from its short-tailed liabilities. Additionally, despite the global financial turmoil in 2008, the company achieved a sound level of investment return.” However Best also noted that “volatile underwriting profitability, dependence on several key corporate clients and concerns about existing claim reserving practices” constitute offsetting factors. The ratings also recognize the company’s “high reliance on reinsurance coverage to protect its capitalization from undue exposure to potential catastrophe perils in Indonesia.” Jasindo sources its business through several key corporate clients in Indonesia. With a focus on aviation, energy and property, the corporate portfolio accounted for 68 percent of Jasindo’s book of business in 2008. To produce better underwriting stability, the company continues to focus on growing its personal lines. Best concluded that despite the “short-tailed nature of its book of business, reserving adequacy is very important as Jasindo continues to rapidly expand its book of business.” In addition Best added that, “given the company’s prevailing incurred but not reported (IBNR) claims reserving practice,” the rating agency “remains cautious regarding Jasindo’s loss development pattern in its insurance portfolio and the potential impact on the adequacy of its claim reserves in the future.”

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