A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of the UK’s Sunderland Marine Mutual Insurance Company Limited (SMMI), both with stable outlooks. Best noted that “SMMI’s consolidated risk-adjusted capitalization improved in 2010 and is expected to remain strong throughout 2011. The improvement was supported by an increase in the company’s capital and free reserves to £46.0 million [$75 million] at year- end 2010,” compared to £43.7 million [$71.2 million] at year-end 2009, and an “increase in reinsurance protection, particularly the placement of a 25 percent quota share reinsurance agreement protecting the company’s protection and indemnity (P&I) and hull accounts. The credit quality of the company’s reinsurance panel is good.” Best added that in 2011 “competitive market conditions continue to place downward pressure on underwriting results, although modest rate increases are being achieved in certain lines of SMMI’s core marine portfolio and for its specialist aquaculture business. Overall, a small pre-tax profit is expected for the year (£3.0 million [$4.89 million] in 2010), with investment income offsetting a technical loss.” Best also said that “prospective investment earnings are expected to be less volatile than in the past, due to the sale of substantially all of the company’s equities during 2009, but will be constrained by low interest rates.” In addition the rating agency pointed out that SMMI has a “strong business profile in its specialist marine and aquaculture markets, where the company’s underwriting expertise and risk management capabilities support high client retention. Business is underwritten in a broad range of territories, which include the United States, the United Kingdom, continental Europe and Australasia.”
A.M. Best Co. has assigned a financial strength rating of ‘A-‘ (Excellent) and an issuer credit rating of “a-” to Bermuda-based Citadel Reinsurance Company Limited, both with stable outlooks. The ratings reflect Citadel Re’s “strong balance sheet, excellent liquidity and its diversified operating strategy,” said Best. The ratings also “recognize the company’s experienced management team, niche and specialized markets, favorable operating results and its conservative underwriting and reserving practices. In addition to its traditional reinsurance book of business, Citadel Re’s unique business plan includes exit strategies that provide both capital relief and liquidity easing for reinsurers and captive companies by transferring liabilities to Citadel Re, allowing for the release of assets and collateral that had been required by the fronting reinsurer.” As a partial offsetting factor Best cited “the implementation risk associated with Citadel Re’s innovative business proposition, which in Best’s view, remains the main risk factor as the company seeks to achieve its projected targets.”
A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Alliance Insurance (PSC), which is based in Dubai, United Arab Emirates. The outlook for both of the ratings is stable. Best explained that the ratings reflect Alliance’s “strong risk-adjusted capitalization and resilient underwriting performance.” As offsetting factors, Best cited the company’s “declining business profile and basic enterprise risk management.” In Best’s opinion, Alliance has “excellent risk-adjusted capitalization benefitting from good earnings retention, with low exposure to asset and underwriting risks compared to a healthy level of capital and surplus.” In addition Best noted that Alliance’s capitalization is “able to absorb further volatility from its limited equity portfolio, in addition to higher dividend payments based on its increased paid up capital. In 2010, Alliance continued its resilient operating performance with pre-tax profits of AED 45 million ($12.3 million), despite a reduction in premium volumes. Both life and non-life operations performed robustly with surplus profits of AED 19 million ($5.2 million) and AED 12 million ($3.3 million), respectively.” Best added that it expects the “non-life combined ratio to remain below 70 percent, with a good performance on motor, supported by a significant inward commission on other business lines.” In addition Best indicated that it “views Alliance’s profitability, which is supported by a conservative investment strategy with 71 percent of invested assets held in cash, favorably since it provides stable returns between 5 percent-6 percent per annum.” However, Best also noted that in 2010, “Alliance’s market position continued to weaken following a reduction in premium income on both life and non-life segments.” Best foresees a “challenging environment for Alliance, with increasing competition likely to hamper growth, as Alliance continues to focus on underwriting profitability. Alliance has a balanced portfolio with life business contributing 55 percent of premium volumes on a gross basis, while the non-life segment continues to have a low retention at 22 percent with significant reinsurance dependence for non-motor risks.” In conclusion Best said it “views Alliance’s risk management as basic, but, sufficient for the low level of underwriting and asset risk relative to shareholders’ equity inherent in the company.”
A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a” of Oman Insurance Company (PSC) (OIC), which is based in the United Arab Emirates. However, Best said its outlook on both ratings “remains negative.” Nonetheless, Best explained that the ratings reflect OIC’s “excellent underwriting performance and leading business position in the United Arab Emirates (UAE) insurance market.” As offsetting factors Best noted the “variability of OIC’s prospective level of risk-adjusted capitalization in relation to a high proportion of equity holdings and the financial strength of its parent company, Mashreqbank psc.” Best explained that “Mashreqbank (the major shareholder of OIC, with 63.65 percent of shares) increased its level of control over OIC in 2010 after the appointment of a new board of directors, several of whom have significant links with the parent company.” As a result, Best said it “considers the financial strength of Mashreqbank to be weaker than that of OIC,” and the move could add a “negative pressure to OIC’s rating.” In addition Best pointed out that, “despite a number of positive board-driven developments at OIC over the past year, including a less aggressive dividend policy, a commitment to de-risk the company’s investment portfolio and to reduce borrowings,” it still considers that “more time is needed to fully assess the impact of the increased influence of Mashreqbank on OIC.” Best also noted that “OIC remains a leading local insurer within the UAE, with a market share in the region of 12 percent. Although OIC’s business is concentrated within the UAE, the company has a diverse range of distribution channels and is increasing its level of geographic diversification via operations in Oman and Qatar, which together make up around 5 percent of the company’s gross premium income.” Best also said it believes that “despite a deterioration in OIC’s level of underwriting profitability in 2010, it has remained at a good level, with technical profits of AED 232 million ($56.4 million) and a combined ratio of 78.2 percent in 2010. Unrealized losses and impairments relating to real estate continued to have a negative impact on overall profitability in 2010, with OIC’s net result falling to AED 94.1 million ($25.6 million) in 2010 from AED 189.6 million ($51.6 million) in 2009.” Best does anticipate “marginally improved underwriting results from OIC in the 2011 financial year.” However, in Best’s opinion, “while OIC currently maintains a good level of risk-adjusted capitalization, the company remains overly exposed to investment risks, with equity investments accounting for nearly half of the company’s asset base. Local investment markets have witnessed volatility in recent years.” Best therefore considers that OIC’s “level of prospective risk-adjusted capitalization and overall profitability is exposed to significant potential volatility, as a major reduction in local asset values is likely to have a negative impact on OIC. Although OIC has plans to de-risk their investment portfolio over the medium term,” Best said it is concerned that “developments are behind original expectations.”
A.M. Best Europe Rating Services Limited has affirmed the financial strength rating of ‘B++’ (Good) and issuer credit rating of “bbb” of Moroccan reinsurer Société Centrale de Réassurance (SCR), both with stable outlooks. The ratings reflect SCR’s “adequate risk-adjusted capitalization and good business profile in the North African markets,” Best explained. As an offsetting factor Best cited the “potential volatility in SCR’s future technical performance as the company increases the share of business it underwrites in the open market in Morocco and overseas. The ratings also factor in the explicit support provided by the Moroccan state through a comprehensive loss absorption agreement.” Best said it views SCR’s “current level of risk-adjusted capitalization as adequate, benefiting from capital credit for market values gains on its investment portfolio. Given the significance of unrealized gains on investments in SCR’s economic capital, the company is exposed to fluctuations in its capital position due to financial market volatility.” However, Best also noted that SCR’s “prospective level of capitalization is also limited by the high dividend requirements of its main shareholder, state-owned Caisse de Depôt et de Gestion.” In Best’s view, however, these factors “are offset by the explicit support provided by the Moroccan state through a comprehensive loss absorption agreement covering the integrality of the company’s activities.” Best said it expects “SCR’s pre-tax earnings to be in the range of MAD 450-500 million ($54-60 million) in 2011 (MAD 509 million [$61 million] in 2010), reflecting continuing reduction in life business volume and stable technical performance in property and casualty business.” However, Best also noted that earnings volatility is “likely to increase going forward as the company increases the share of non-life business underwritten in the open market in Morocco and abroad.” Best also pointed out that SCR” maintains a strong competitive position as the leading reinsurer in the Moroccan market.” In Best’s view, the company’s business profile “should further benefit from its pivotal role in the new natural catastrophe protection system currently being implemented in Morocco.” Best also said it expects the “additional premium income that is expected from the natural catastrophe reinsurance scheme will offset over the medium term the decrease in business volume due to the gradual phasing out of the legal cessions regime in Morocco by 2012.”
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