A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating (FSR) of ‘A” (Excellent) and the issuer credit rating (ICR) of “a” of Sirius International Insurance Corporation (publ), which is based in Stockholm, Sweden. The outlook for both ratings is stable.
Best noted that “despite large catastrophe losses in 2010 and during the first half of 2011, Sirius is expected to maintain an excellent stand-alone risk-adjusted capitalization in 2011. Sirius’ claims paying ability continues to be enhanced by a safety reserve, which in accordance with Swedish insurance regulations, can only be released to cover insurance losses and is funded from the company’s cumulative retained pre-tax earnings. Sirius’ safety reserve at year-end 2010 amounted to SEK 9.6 billion [$1.4253 billion].”
Sirius reported a reduced, but nevertheless good, pre-tax profit in 2010 of SEK 1.1 billion [$163 million], compared to SEK 1.6 billion [$237.6 million] in 2009. “Technical performance was impacted by a number of natural and man-made catastrophes during 2010, such as the Chilean earthquake, Xynthia and the Deepwater Horizon disaster,” said Best.
“For the first six months of 2011, the company’s underwriting results deteriorated due to large losses resulting from the Japanese earthquake and tsunami and the New Zealand earthquake (current net losses of $87 million [SEK 586 million] and $40 million [SEK 269.5 million], respectively).”
Best also pointed out that in September 2011, White Mountains Insurance Group Ltd. (Sirius’ ultimate parent) announced the “reorganization of the reinsurance arm of its business. Regulatory approvals have been received and all reinsurance operating entities will be consolidated under Sirius. Sirius will be the lead operating entity of the newly formed reinsurance group, Sirius International Group, Ltd. with Sirius America Insurance Company (Sirius America) (formerly White Mountains Reinsurance Company of America), as a wholly owned subsidiary.”
Best added that the “reorganization is expected to improve capital and tax efficiency across the group, as well as enhance the diversification of Sirius’ overall portfolio. Sirius’ regulatory capital is expected to increase as a result of the reorganization.
Sirius maintains “a good business profile in the reinsurance market, writing business through an international network of branch offices,” Best continued. The report also indicated that on a stand-alone basis – excluding the impact of the reorganization – Best “expects Sirius’ gross written premiums to decrease by approximately 25 percent in 2011.
“This is primarily due to the cancellation of quota share treaties with Sirius America and Esurance Insurance Company (a subsidiary of White Mountains Insurance Group Ltd.) in conjunction with the sale of the company to Allstate Corporation at 1 January, 2011. Sirius continues to focus on shorter tail lines, with property reinsurance currently generating approximately 50 percent of net written premiums.
“As a result of the previously mentioned reorganization, Sirius America is now a wholly owned subsidiary of Sirius, and as such, has the same FSR of ‘A’ (Excellent) and ICR of “a” as its parent.”
Source: A.M. Best
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