Ratings Roundup: AGA Int’l., Aspen (Notes)

April 30, 2013

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit ratings of “a+” of AGA International SA (AGAI SA), which is headquartered in France and operates a subsidiary, Jefferson Insurance Company, which is headquartered in Richmond, Virginia. The outlook for all of the ratings remains stable. Best said 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. The ratings also take into consideration the implicit support of AGAI SA’s ultimate parent, Allianz SE.” Best’s ratings for Jefferson “reflect enhancement due to the explicit support it receives from AGAI SA in the form of an 80 percent quota share reinsurance treaty. AGAI SA is expected to maintain good stand-alone risk-adjusted capitalization in 2013, supported by retention of profits in recent years and assisted by the completion of a scheme to restructure some of its subsidiaries as branches.” Best also noted that the “company’s risk-adjusted capitalization also benefits from the low underwriting volatility, as demonstrated by a stable loss ratio, inherent in its specialist lines of business. In addition, consistent with the short-tail nature of AGAI SA’s insurance liabilities, its investment portfolio is predominantly cash and highly liquid investment grade bonds. AGAI SA continues to achieve strong operating performances in difficult market conditions. In 2011, the company reported an operating profit before tax of €59.9 million [78.3 million], in spite of claims arising from the Chilean volcanic ash clouds and Hurricane Irene, with a good investment return of €42.5 million [$55.55 million] contributing to this result. The combined ratio of 96.5 percent in 2011 was similar to that achieved in 2010. With a modest increase in pre-tax earnings expected to be reported for 2012, a marginal improvement in the combined ratio for 2012 is likely, despite significant losses from Superstorm Sandy. The combined ratio takes into account high acquisition expenses for distribution of AGAI SA’s products through large business partners.” Best explained: “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 as well, 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.”

A.M. Best Europe – Rating Services Limited has assigned a debt rating of “bb+” to the $275 million 5.95 percent preference shares issued by Bermuda-based Aspen Insurance Holdings Limited, with a stable outlook. All other ratings on Aspen entities and related debt issues remain unchanged. Best said it “expects the net proceeds from the offering to be used to redeem the current $230 million Perpetual Preferred Income Equity Replacement Securities and to support other general corporate purposes. The new perpetual preference shares have a coupon rate of 5.95 percent per annum and are non-callable for ten years. Financial and debt leverage ratios remain within A.M. Best’s tolerance levels.”

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