Ratings Recap: Insurance Barbados, Talanx (Notes), Ability Re, Newport Bonding

April 23, 2012

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Insurance Corporation of Barbados Limited (ICBL), both with stable outlooks. The ratings reflect ICBL’s “solid capitalization, leading market presence in its domestic market, favorable operating results in recent years and its affiliation with Bermuda-based BF&M Limited, its majority owner, which is publicly traded on the Bermuda Stock Exchange,” Best explained. The report also noted that as the” leading property/casualty insurer in the Barbados market, ICBL has excellent brand name recognition. ICBL has achieved favorable underwriting results in recent years through prudent risk selection and underwriting discipline. Underwriting profitability has been augmented by consistent levels of investment income, and this has enabled the company to continue to enhance its capitalization. In addition, ICBL’s affiliation with BF&M Limited affords it potential access to the group’s resources, including financial services, investment management expertise and information technology.” As partial offsetting factors Best cited “the geographic concentration of ICBL’s business in Barbados and the increasingly competitive market in which the company operates. ICBL, like other regional insurers, has significant exposure to catastrophic losses. The company manages this risk through the utilization of reinsurance to limit its catastrophe exposure to a manageable level and protect its surplus against frequency of events. While the ratings of ICBL are stable, factors that could contribute to rating enhancement include sustained improvement in underwriting performance and continued strong overall profitability. Factors that may lead to negative rating actions include significant loss of market share, continued decline in underwriting profitability and substantial deterioration in risk-adjusted capitalization as measured by Best’s capital model.”

A.M. Best Europe – Rating Services Limited has assigned a debt rating of “bbb” to the €500 million [$656.5 million] subordinated fixed to floating rate notes due 2042 issued by Talanx Finanz (Luxembourg) S.A. and irrevocably guaranteed on a subordinated basis by Germany’s Talanx AG, which is the intermediate management holding company for all HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI V.a.G.) companies (collectively known as the Talanx Group). The assigned outlook is stable. Best said it “expects the net proceeds from the offering to be used to support the Talanx Group’s ongoing organic growth, further expansion into emerging markets and/or retiring outstanding hybrid debt. The subordinated fixed to floating rate notes will pay a fixed annual coupon until the call date, 10 years after the issuance, when the interest rate will convert to a floating rate based on a three-month Euro Interbank Offered Rate, plus a margin. Financial and debt leverage ratios are expected to remain within Best’s tolerance levels.” In addition Best concurrently withdrew the debt rating of “bbb+” on €250 million [$328.3 million] subordinated fixed to floating rate notes due 2024 issued by the former Gerling-Konzern Allgemeine Versicherung AG and assigned the above debt rating to HDI-Gerling Industrie Versicherung AG, which is in line with the legal entity status of the debt.

A.M. Best Co. has placed under review with negative implications the financial strength rating of ‘B+’ (Good) and issuer credit ratings of “bbb-“of Ability Reinsurance (Bermuda) Ltd. (Ability Re) and Omaha-based Ability Insurance Company (AIC), collectively referred to as Ability Re. Ability Reinsurance Holdings Limited (Ability Re Holdco) is Ability Re’s ultimate parent. The ratings of Ability Re “were placed under review to reflect the uncertainty surrounding the ultimate financial impact on the company following a recent Montana court jury award of $34 million in compensatory and punitive damages to an Ability Re long-term care policyholder,” Best explained. During the under review period, Best said it would “continue to hold discussions with Ability Re’s management team as the case progresses through the legal system. If Ability Re’s financial condition is materially impacted by the final resolution, Best would most likely downgrade the ratings by one or more notches.”

A.M. Best Co. has placed under review with negative implications the financial strength rating of ‘C++’ (Marginal) and issuer credit rating of “b” of Newport Bonding and Surety Company, which is based in Puerto Rico. Best said the under review status “reflects the significant uncertainty regarding Newport’s overall financial condition as it has not yet filed its year-end 2011 annual statement. The ratings will remain under review pending Best’s receipt of the annual statement, as well as further discussions with management to determine the underlying reasons for the delay in filing.” Upon receipt, Best said it would “review the financial condition of Newport and will determine whether its current ratings are appropriate.”

Was this article valuable?

Here are more articles you may enjoy.