Best Affirms Lloyd’s Syndicates 2623, 623, 3623, 3622 Ratings (Beazley)

A.M. Best Europe – Rating Services Limited has affirmed the financial strength ratings of ‘A ‘(Excellent) and issuer credit ratings (ICR) of “a+” of Lloyd’s Syndicate 2623, Lloyd’s Syndicate 623, Lloyd’s Syndicate 3623 and Lloyd’s Syndicate 3622.

In addition Best has affirmed the ICR of “bbb+” of Beazley plc, which is based in Jersey, and is the ultimate holding company of the Beazley group of companies. Best also affirmed the same ratings for the UK-based Beazley Group Limited, an intermediate holding company.

Best also affirmed the debt ratings of “bbb” on the £150 million [$231.7 million] junior subordinated notes due 2026 and the $18 million junior subordinated notes due 2034 issued by Beazley Group Limited.

The outlook on all ratings is stable.

Syndicates 2623, 623, 3623 and 3622 are managed by Beazley Furlonge Limited. Syndicates 2623 and 623 underwrite business at Lloyd’s in parallel with a premium split of 81 percent syndicate 2623 and 19 percent syndicate 623, in line with each syndicate’s share of overall combined capacity. Syndicates 2623, 3623 and 3622’s capital is provided 100 percent by Beazley, via its corporate member, while syndicate 623 is supported by third party capital.

The syndicates “benefit from the good financial flexibility of Beazley, which maintains strong consolidated risk-adjusted capitalization and raised £150 million [$231.7 million] in a fully underwritten rights issue and placing in April 2009,” Best explained. “In addition, the syndicates benefit from the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates.

“Both syndicate 2623 and syndicate 623 have solid technical records, which reflect good underwriting discipline, prudent reserving practices and their well-diversified portfolios. In 2010, a stable combined ratio of approximately 90 percent is anticipated on an annually accounted basis (2009: 91.1 percent and 90.5 percent for 2623 and 623, respectively).”

Best also noted that as “Beazley has a strategy of not releasing reserves from catastrophe-exposed accounts until premiums are substantially earned, reserves from the 2009 underwriting year, when catastrophe experience was benign, are available to meet claims arising from the Chilean earthquake.

“In addition, the syndicates’ exposure to the Deepwater Horizon oil rig loss is modest. The prospective performance of the syndicates’ specialty lines business, which represents approximately 45 percent of gross written premiums, is expected to benefit from measures taken to protect this business against weak economic conditions.

“Syndicate 3623 was established in 2008 and syndicate 3622 in 2009, following the Beazley group’s acquisition in 2008 of Momentum Underwriting Management Limited (rebranded Beazley Underwriting Services). Syndicate 3623 writes personal accident insurance and reinsurance and sports disability insurance, while syndicate 3622 writes the associated life business. In addition, syndicate 3623 accepts business through quota shares with Beazley’s U.S. admitted carrier, Beazley Insurance Company, Inc. (BICI). On a year of account basis, both syndicates are expected to report good technical results for the open years 2008 to 2010, with anticipated combined ratios of between 90 percent-95 percent.”

Best described the syndicates managed by Beazley as having a “strong business profile in the Lloyd’s market, demonstrated by good leadership positions in their core lines of business. In addition, Beazley is establishing itself in the local U.S. market writing targeted lines of business through its managing general agents and BICI. This locally written business improves the diversification of the syndicates’ and the group’s underwriting portfolios by size of risk.”

However, Best also cautioned that the “U.S. market remains intensely competitive, and A.M. Best believes the group will find profitable growth in this market challenging in the near term.”

Source: A.M. Best