Best Affirms Argo Re, Argo Group and Subs Ratings; Outlook Stable

June 20, 2012

A.M. Best Co. has affirmed the financial strength ratings (FSR) of ‘A’ (Excellent) and issuer credit ratings (ICR) of “a” of Bermuda-based Argo Re Ltd. and its subsidiaries, as well as the ICR of “bbb” and debt ratings of the parent holding company, Argo Group International Holdings, Ltd. , which is also based in Bermuda

Best said the rating affirmations reflect Argo Re management’s “product expertise in niche focus areas, historically strong operating performance and solid reserving practices. Argo Re also remains very well capitalized despite incurring over $200 million in catastrophe losses in 2011.

“The ratings also consider Argo Group’s first quarter 2012 earnings, its conservative financial leverage (total debt-to-total capital) and the financial flexibility that Argo Re derives from Argo Group.”

Best indicated that in the near term it “expects that Argo Re’s underwriting and operating performance will be positively influenced by actions that its management has undertaken to reduce its worldwide property exposure and improve overall operational efficiencies.”

As partial offsetting factors Best cited the “losses generated from its international units and the strategic risk associated with Argo Group’s continued international expansion.”

Best pointed out that “while Argo Group’s recent expansion into the Dubai, Brazil and European Union markets further diversifies the organization’s insurance and reinsurance platform, there is considerable execution risk associated with these endeavors. Management’s ability to execute on this strategy without significantly disrupting its current operations will be integral in future rating evaluations.

“Additional offsetting rating factors include Argo Re’s participation in a highly competitive environment characterized by significant price competition and the effects from adverse economic conditions.”

Best said it “believes that Argo Re and its subsidiaries are well positioned at their current rating levels. Key drivers that could lead to downward rating movement include deterioration in the organization’s underwriting and/or operating performance and a decline in risk-adjusted capital.”

The companies affected by the rating actions were listed as follows:
The FSR of ‘A’ (Excellent) and ICRs of “a” have been affirmed for Argo Re Ltd. and its following subsidiaries:
ArgoGlobal SE
Argonaut Great Central Insurance Company
Argonaut Insurance Company
Argonaut Limited Risk Insurance Company
Argonaut-Midwest Insurance Company
Argonaut-Southwest Insurance Company
Colony Insurance Company
Colony National Insurance Company
Colony Specialty Insurance Company
Rockwood Casualty Insurance Company
Select Markets Insurance Company
Somerset Casualty Insurance Company

The following indicative debt ratings available under the shelf registration have been affirmed:
Argo Group International Holdings, Ltd.—
— “bbb” on senior unsecured debt
— “bbb-” on subordinated debt
— “bb+” on preferred stock

Argo Group Statutory Trust—
— “bb+” on preferred stock

Source: A.M. Best

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