Ratings Recap: United, Aviva Canada, Jupiter

July 6, 2011

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Barbados-based United Insurance Company Limited, both with stable outlooks. Best said then ratings reflect United’s “favorable capitalization, solid regional market profile and continued positive overall earnings. United’s ultimate parent is Neal & Massy Holdings Limited, a large Caribbean-based conglomerate, which is publicly traded on the Trinidad and Tobago and Barbados stock exchanges.” Best also noted that “United is a leading insurer in several of its markets, particularly in its home domicile of Barbados, and enjoys excellent brand recognition throughout the region where it operates. United has reported underwriting profits in four of the past five years, which has been complemented by a steady stream of investment revenue. The company also maintains conservative risk management strategies and a comprehensive reinsurance program. This has enabled United to significantly enhance its capitalization, which remains more than adequate for its current rating level.” As partial offsetting factors Best cited “the increasingly competitive regional markets in which United operates, and its exposure to numerous natural catastrophes that are present throughout the Caribbean. In addition, United’s risk profile has changed in recent years through its assumption of European and Asian exposure as part of its reinsurance segment. While this affords United some geographic diversification in its operations, the company is accepting risk in new markets.” Best will continue to closely monitor United’s experience with these treaties for any adverse developments.

A.M. Best Co. has assigned a financial strength rating of ‘A’ (Excellent) and issuer credit ratings of “a+” to Aviva Insurance Company of Canada and its affiliates, Elite Insurance Company, Traders General Insurance Company, Pilot Insurance Company, Scottish & York Insurance Company, Limited and S&Y Insurance Company. The outlook assigned to all of the ratings is positive. All companies are domiciled in Ontario. The ratings and outlook “acknowledge that the companies are members of Aviva International Insurance Limited due to their overall importance to the Aviva organization within the Canadian market,” Best explained. “These Canadian companies are managed as one entity through common management, and have solid brand name recognition marketing under the Aviva name, providing home, automobile and business insurance across all provinces. The ratings also are reflective of the companies’ strong consolidated risk-adjusted capitalization, historically profitable operating performance and strong business profile.” However, Best cited the “soft commercial lines pricing in Canada, strong competition for market share and exposure to the challenging auto markets in certain parts of Ontario,” as partial offsetting factors. In addition best noted that the “ratings are further enhanced by being members of Aviva International Insurance Limited, with its implicit and explicit support, and the anticipation that financial and operational support will prospectively be provided to the Canadian operations as needed by Aviva International Insurance Limited, AVIVA plc and its affiliate group members.”

Standard & Poor’s Ratings Services has revised its outlook on Jupiter Insurance Ltd. to stable from negative, and has affirmed the ‘A’ long-term counterparty credit and insurer financial strength ratings on the company. S&P explained that the “outlook revision and rating affirmation follow the same rating actions on Jupiter’s parent, BP PLC (A/Stable/A-1). The outlook revision on BP reflects our view of reduced downside risk to BP’s credit quality, mainly due to supportive oil prices and refining margins in recent quarters (see “BP PLC Outlook Revised To Stable On Supportive Market Conditions; ‘A/A-1’ Ratings Affirmed,” published on July 6, 2011).” S&P noted that, as Jupiter “qualifies as a captive insurer under our rating criteria, we rate it at the same level as its parent. The ratings on Jupiter will therefore move in lock step with those on BP. Similarly, the stable outlook on Jupiter reflects the outlook on BP and will move in lock step with that on its parent.”

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