A.M. Best Co. has placed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Bermuda-based S.A.C. Re, Ltd. under review with negative implications.
Best explained that the rating actions reflect its “concern with the business plan originally presented by SAC Re, which took into account invested assets being managed by S.A.C. Capital.
“Given the current circumstances [SEC and Federal court cases] surrounding the investment manager, the original business plan may be challenged. Presently, there is uncertainty as to whether the invested assets can be managed by S.A.C. Capital as well as whether there will be ramifications concerning any affiliation with S.A.C. Capital on the reinsurance franchise going forward.”
Best also noted that the “reputational risk is due to both the reinsurer and the investment manager sharing the same name, as SAC Re is not a “subsidiary” or a “unit” of S.A.C. Capital, and S.A.C. Capital only serves as the investment manager. Despite these recent events the risk-adjusted capitalization of SAC Re remains supportive of its current ratings.”
Best said it “expects to resolve the under review status upon review of an updated business plan, which includes an updated investment management plan that may or may not include S.A.C. Capital as an investment manager.
“Retention of key management through the forecasted business plan also will be an important factor in resolving the under review status.
“Rating downgrades could occur if SAC Re cannot separate itself from reputational risk, the business plan is not executed over the long term or key management is not retained.”
Source: A.M. Best