Ratings: United Overseas, Aspen (Pref. Shares), BF&M, Island Heritage

April 6, 2012

A.M. Best Co. has assigned a financial strength rating of ‘A’ (Excellent) and an issuer credit rating of “a+” to Singapore-based United Overseas Insurance Limited (UOI); both ratings have a positive outlook. Best said the ratings “reflect UOI’s solid risk-adjusted capitalization, prudent underwriting philosophy and strong operating performance. UOI’s local capital adequacy ratio in fiscal year 2010, which stood above 400 percent, remains well above the minimum required by Singaporean regulations and ranks at the top compared to its local peers. The company’s risk-adjusted capitalization, as demonstrated by Best’s Capital Adequacy Ratio (BCAR), is adequate to support its current ratings.” In addition Best noted that “UOI has a good track record of favorable operating results. Its combined ratio has been stable at approximately 40 percent over the past five years, which is largely attributable to UOI’s prudent underwriting philosophy. UOI’s underwriting performance has outperformed the Singapore general insurance market and many Singapore general insurers. Favorable investment returns in the past also largely contributed to UOI’s outstanding operating performance.” As an offsetting factor, Best cited “the potential volatility in UOI’s investment returns. In fiscal year 2010, UOI had more than 30 percent of its invested assets in its equity portfolio. The company’s equity portfolio has exposed UOI to market volatility in recent years;” however, Best’s added that in its opinion, “the company is well capitalized to absorb this market volatility. Future upward movement on the ratings could occur if UOI shows improvement in its risk-adjusted capitalization through continuing strong underwriting and operating performance, continuing growth in capital supported by its operating revenue and improvement in managing the company’s investment risk. Negative rating actions could occur if the operating performance of UOI deteriorates or if risk-adjusted capitalization declines to a level that is below Best’s expectations.”

A.M. Best Co. has assigned a financial strength rating of ‘A’ (Excellent) and an issuer credit rating of “a+” to Singapore-based United Overseas Insurance Limited (UOI); both ratings have a positive outlook. Best said the ratings “reflect UOI’s solid risk-adjusted capitalization, prudent underwriting philosophy and strong operating performance. UOI’s local capital adequacy ratio in fiscal year 2010, which stood above 400 percent, remains well above the minimum required by Singaporean regulations and ranks at the top compared to its local peers. The company’s risk-adjusted capitalization, as demonstrated by Best’s Capital Adequacy Ratio (BCAR), is adequate to support its current ratings.” In addition Best noted that “UOI has a good track record of favorable operating results. Its combined ratio has been stable at approximately 40 percent over the past five years, which is largely attributable to UOI’s prudent underwriting philosophy. UOI’s underwriting performance has outperformed the Singapore general insurance market and many Singapore general insurers. Favorable investment returns in the past also largely contributed to UOI’s outstanding operating performance.” As an offsetting factor, Best cited “the potential volatility in UOI’s investment returns. In fiscal year 2010, UOI had more than 30 percent of its invested assets in its equity portfolio. The company’s equity portfolio has exposed UOI to market volatility in recent years;” however, Best’s added that in its opinion, “the company is well capitalized to absorb this market volatility. Future upward movement on the ratings could occur if UOI shows improvement in its risk-adjusted capitalization through continuing strong underwriting and operating performance, continuing growth in capital supported by its operating revenue and improvement in managing the company’s investment risk. Negative rating actions could occur if the operating performance of UOI deteriorates or if risk-adjusted capitalization declines to a level that is below Best’s expectations.”

A.M. Best Europe – Rating Services Limited has assigned a debt rating of “bb+” to the $150 million 7.25 percent preference shares, issued by Bermuda-based Aspen Insurance Holdings Limited, with a stable outlook. Best added that “all other ratings on Aspen entities and related debt issues remain unchanged. Best explained that it “expects the net proceeds from the offering to be used to support the Aspen group’s liquidity requirements and support its expansion in the United States. The perpetual preference shares have a coupon rate of 7.25 percent per annum and are non-callable for five years. Financial and debt leverage ratios are expected to remain within Best’s tolerance levels.”

A.M. Best Co. has commented that the issuer credit rating of Bermuda-based BF&M Limited, as well as the issuer credit ratings and financial strength ratings of its insurance subsidiaries, remain unchanged following the announcement that BF&M has entered into an agreement to acquire Cayman Islands-based Island Heritage Holdings Limited and its subsidiaries. Best said it “anticipates that the proposed transaction will not stress BF&M’s leverage or coverage position. Furthermore, the proposed acquisition will allow BF&M to expand its presence in the property and casualty segment, as well as extend its geographical market outside the island of Bermuda. (See following)

A.M. Best Co. has commented that the financial strength rating of ‘A-‘ (Excellent) and the issuer credit ratings (ICR) of “a-” of Cayman Islands-based Island Heritage Insurance Company Ltd. are unchanged following the recent announcement of its sale to BF&M Limited. The outlook for the ratings remains stable. Best explained that “Island Heritage was placed for sale by its majority shareholder, Flagstone Reinsurance Holdings, S.A., in late 2011 as part of the restructuring plan that Flagstone Re had in place to streamline the organization in an effort to refocus on its core underwriting and operating strategies. Island Heritage will retain its brand name and the management team will remain intact. The company will continue to operate on a stand-alone basis.”

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