Best Affirms AGA International (Ex-Mondial Assistance) Ratings; Outlook Stable

March 27, 2012

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit ratings of “a+” of France’s AGA International SA (AGAI SA) – formerly Mondial Assistance International SA -and its U.S. subsidiary, the Virginia-based Jefferson Insurance Company.

The outlook for all of the ratings remains stable.

Best explained that the ratings reflect AGAI SA’s “good risk-adjusted capitalization, continued good operating performance and excellent business profile as a leading worldwide travel insurance and assistance provider.” They also take into account the implicit support of the company’s ultimate parent, Allianz SE.

Jefferson’s ratings “reflect enhancement due to explicit support from AGAI SA in the form of an 80 percent quota share reinsurance treaty,” Best added.

“AGAI SA is expected to maintain good stand-alone risk-adjusted capitalization in 2012, supported by retention of profits in recent years and taking into account the low underwriting volatility that characterizes its specialist lines of business and is demonstrated by a stable loss ratio,” Best continued. “In addition, consistent with the short-tail nature of the company’s insurance liabilities, its investment portfolio includes a significant element of cash and highly liquid investment-grade bonds.”

Best also pointed out that AGAI SA’s operating performance “has proved resilient in difficult market conditions, with a modest increase in pre-tax earnings expected to be reported for 2011. In 2010, the company achieved a good operating profit before tax of €35.3 million [$47.3 million], in spite of claims arising from the Icelandic volcanic ash cloud and the collapse of Cruise West.

“A solid investment return of €15.2 million [$20.37 million] contributed to the company’s operating result. The combined ratio improved to 96 percent from 98 percent and in 2011 is likely to show further marginal improvement. The combined ratio takes into account high acquisition expenses for distribution of AGAI SA’s products through large business partners.”

Best noted that AGAI SA’s main lines of business are “travel insurance and roadside assistance, areas where the company has built a strong brand and extensive expertise. World tourism continues to grow and demand for AGAI SA’s products is likely to grow with it, particularly as economic conditions gradually improve.

“Positive movement in AGAI SA’s ratings is considered unlikely in the short term. Negative movement in the ratings could result from a significant deterioration in operating performance, erosion of risk-adjusted capitalization or a reduction in support from Allianz.”

Source: A.M. Best

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