Standard & Poor’s has affirmed its ‘A’ counterparty credit and financial strength ratings on Platinum Underwriters Reinsurance Inc. and Platinum Underwriters Bermuda Ltd. (collectively referred to as Platinum). S&P also affirmed its ‘BBB+’ counterparty credit rating on Platinum Underwriters Holdings Ltd.
The outlook on all of these ratings remains stable.
The announcement noted that “Platinum incurred $248 million of losses from catastrophes in the first quarter of 2011. While the losses from the Tohoku earthquake in Japan ($87 million) appeared to be lower relative to what would be expected from a company of Platinum’s size, the losses from the Christchurch earthquake in New Zealand ($137 million) were somewhat higher than what would be expected.”
S&P also explained that “as the group continues to shift its business mix toward the property and catastrophe lines of business and away from the casualty lines of business, we believe that its earnings and capital volatility will be higher than it has been historically–resembling more closely the profile of a property-catastrophe reinsurer.”
Overall the ratings on Platinum Underwriters Holdings and its core operating subsidiaries reflect the group’s “cycle management and highly skilled and experienced underwriting and actuarial staff,” S&P continued. “Platinum’s strategy of shifting its diverse product mix opportunistically, based on premium rate adequacy should help to somewhat mitigate its exposure to cyclical pricing in its property/casualty lines of business.”
As partial offsetting factors S&P cited Platinum’s “somewhat high concentration of business in terms of geographic reach and distribution. In addition, given that a significant proportion of Platinum’s reserves are for its casualty lines, the company could be susceptible to reserve strengthening if unfavorable loss trends or inflationary concerns arise.”
S&P explained that the stable outlook “reflects our expectation that Platinum will maintain its underwriting discipline despite competitive market conditions. Accordingly, we expect that the company will report an approximately 15 percent-20 percent decline in premiums during 2011, largely reflecting softness in casualty rates and the group’s conservative underwriting appetite.”
As a result S&P indicated that it “unlikely to upgrade Platinum during the next one year to two years because of the company’s limited competitive position relative to peers’ and the continued competitive market conditions in its lines of business.
“To maintain the ratings, we expect that Platinum’s 2011 combined ratio will be near 120 percent with a return on revenue near negative 5 percent, assuming normal catastrophe losses for the remainder of the year. Under this assumption, we also expect that the company’s net loss will be near $100 million (although the actual results may be positively influenced by lower catastrophe activity or favorable loss reserve development).”
S&P also indicated that it would “consider taking a negative rating action if Platinum’s operating performance is substantially lower than our expectations, its capital adequacy is lower than expected, loss reserves develop adversely, or a significant deterioration in the company’s liquidity position occurs.”
Source: Standard & Poor’s
Topics Catastrophe Profit Loss Underwriting
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