Ratings Recap: Swiss Re Corporate Solutions, Milli Re

May 15, 2012

A.M. Best Co. has assigned a financial strength rating of ‘A+’ (Superior) and an issuer credit rating of “aa-” to Swiss Re Corporate Solutions Ltd. (SRCSL), both with stable outlooks. The ratings of SRCSL are “based on its strong expected risk-based capitalization, profitable projected operating results and worldwide scope of operations,” Best said. “SRCSL is the top level operating and holding company of Swiss Re Group’s Corporate Solutions business segment, which provides property, casualty and special lines insurance to commercial businesses. Swiss Re Group had been writing these lines of business through existing legal entities for many years, with a geographic focus on North America, Europe and Asia. Initially, SRCSL’s role will be to aggregate risk from its affiliated companies by providing various forms of internal and external reinsurance protection. The company will not initially write external business.” Best added that it “expects SRCSL to maintain risk-based capitalization that will be fully supportive of its rating level and produce operating results in line with projections. The company’s risk management is fully integrated with Swiss Re Group’s formal risk management program that oversees all aspects of SRCSL’s individual risks.”

A.M. Best Co. has assigned a financial strength rating of ‘A+’ (Superior) and an issuer credit rating of “aa-” to Swiss Re Corporate Solutions Ltd. (SRCSL), both with stable outlooks. The ratings of SRCSL are “based on its strong expected risk-based capitalization, profitable projected operating results and worldwide scope of operations,” Best said. “SRCSL is the top level operating and holding company of Swiss Re Group’s Corporate Solutions business segment, which provides property, casualty and special lines insurance to commercial businesses. Swiss Re Group had been writing these lines of business through existing legal entities for many years, with a geographic focus on North America, Europe and Asia. Initially, SRCSL’s role will be to aggregate risk from its affiliated companies by providing various forms of internal and external reinsurance protection. The company will not initially write external business.” Best added that it “expects SRCSL to maintain risk-based capitalization that will be fully supportive of its rating level and produce operating results in line with projections. The company’s risk management is fully integrated with Swiss Re Group’s formal risk management program that oversees all aspects of SRCSL’s individual risks.”

A.M. Best Europe – Rating Services Limited has placed under review with negative implications the financial strength rating of ‘B++’ (Good) and the issuer credit rating of “bbb” of Turkey’s Milli Reasurans Turk Anonim Sirketi (Milli Re). Best said it had “taken this decision in light of Milli Re’s marked deterioration in capitalization. In 2011, Milli Re’s total capital and surplus fell 43 percent to TRY 461.6 million ($242 million), driven primarily by poor underwriting results, and fair value losses in the company’s strategic holding in Anadolu Sigorta.” Best also indicated that Milli Re’s domestic business “continues to perform poorly in line with the ever competitive Turkish market, whilst the company suffered catastrophic losses of approximately $45 million (on a net basis) in its international business in 2011. This, combined with the higher regulatory reserving requirement as a result of changes in methodology, drove the company’s combined ratio over 130 percent and net losses of TRY 146.4 million ($77 million) for the year. Having increased its shareholding in Anadolu Sigorta to 57.3 percent in September 2010, Milli Re saw the fair value of this strategic investment fall by TRY 160 million [$88.67 million]—more than 40 percent—in 2011.” Best added that, “although the company’s risk-adjusted capital position has been severely damaged by these events,” it acknowledges that the “book value of both the company’s owner-occupied real estate and investment property portfolio is substantially less than its market value. Assuming credit is given for the market value of real estate in Best’s capital adequacy model, Milli Re’s risk-adjusted capitalization remains at a supportive level.” Best also noted that “Milli Re’s capital position has experienced some recovery in the first quarter of 2012 as a result of improving financial market conditions and net income for the period. According to unaudited accounts, at end-March 2012, total capital and surplus stood at TRY 551.7 million ($305.7 million).” Best said it would “conduct a thorough review of the company’s capitalization and performance as part of its work to resolve the under review status. Milli Re’s ratings are likely to be downgraded or placed on negative outlook,” in the event that Best feels “that prospective risk-adjusted capitalization no longer supports the current rating level.” Best added that it “considers any positive movement on the ratings in the short term as unlikely.”

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