Ratings Recap: Beazley (U.S.), Atradius Trade Credit, HDI-Gerling America

December 23, 2010

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a” of Connecticut-based Beazley Insurance Company, Inc. (BICI), both with stable outlooks. These ratings reflect “BICI’s solid stand-alone risk-adjusted capitalization, in addition to the extensive explicit support provided through quota share reinsurance agreements with Lloyd’s Syndicate 3623, which is managed by Beazley plc,” Best explained. “BICI also benefits from third-party credit risk protection provided by Beazley.” As offsetting factors Best cited the “challenges BICI has faced in its initial years in operation, while trying to establish itself in the very competitive specialty commercial insurance marketplace. These challenges have led to BICI falling short of its projected premium production and/or profitability targets in some years, as the company has strived to grow its portfolio profitability while competing with established brands.” Best added that it “expects BICI to continue utilizing established Beazley underwriting principles and strategies to build its book of business.”

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit ratings of “a-” of Atradius Trade Credit Insurance, Inc. (ATCI), headquartered in Hunt Valley, MD, and its wholly owned and 100 Percent reinsured subsidiary, Atradius Trade Credit Insurance Company, New Jersey. The outlook for all of the ratings, however, is negative. The ratings reflect the group’s “excellent capitalization, dynamic risk reduction efforts that have improved loss ratio performance, solid market position in the trade credit industry and strong pre-crisis operating profitability,” said Best. “The ratings also reflect the substantial reinsurance protection, access to a global credit analysis infrastructure and financial flexibility afforded the group by its Spain-based majority shareholder, Grupo Catalana Occidente, S.A. (GCO) and affiliates, including the Netherlands-based parent, Atradius N.V.” As offsetting factors Best noted “the downturn in the group’s underwriting results during the recent credit crisis, dependence on reinsurance as evidenced by the elevated ceded leverage measure, and the execution risk in completing its turnaround given recent senior management changes and ongoing competitive pressures.” Despite improved loss ratio performance, the rating outlook recognizes Best’s “concern with management’s ability to significantly improve earnings over the near term given the anticipated weak recovery of both the U.S. and global economies, as well as pressure from the elevated expense structure, which negatively impacts operating results. While the rate of premium decline has slowed, it may take some time to determine the sustainability of recent management initiatives intended to improve underwriting performance. ATCI is a wholly owned subsidiary of Atradius N.V., of which 64 Percent is owned by Grupo Credito y Caucion, SL. GCO has an ownership interest of 74.09 Percent (26.66 Percent directly and 47.43 Percent indirectly through Grupo CYC) in Atradius N.V. and a controlling position of 90.89 Percent.

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and the issuer credit rating of “a” of Chicago-based HDI-Gerling America Insurance Company (HDI-GAIC, both with stable outlooks. The ratings of HDI-GAIC largely reflect its “solid risk-adjusted capitalization and the benefit of the explicit support provided through substantial internal reinsurance by HDI-Gerling Industrie Versicherung AG (HGI) (Germany) and its subsidiary and immediate parent of HDI-GAIC, HDI-Gerling Welt Service AG (HGWS) (Germany), via significant facultative cessions and 95 Percent quota share treaties, which have been in effect since January 1, 2000 and July 1, 2008, respectively; a retroactive reinsurance cover with HGI that covers any net adverse development on policies incepting prior to January 1, 2000; and the implied support of future parental commitment. HDI-GAIC principally markets global-linked commercial lines business to parent company clients that have operations in the United States.”

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