Best Assigns ‘A’ Ratings to SVB’s Lloyd’s Syndicates 2147 & 1007

February 1, 2006

In two separate announcements A.M. Best Co. said it has assigned a Best’s Syndicate Rating of “A” (Excellent) and an issuer credit rating (ICR) of “a” to Lloyd’s Syndicate 2147 and 1007.

SVB Syndicates Limited (SVBS) manages both syndicates, and Best also said it has assigned an ICR of “bb+” to U.K.-based SVB Holdings Plc (SVBH), the non-operating holding company of the SVBH group of companies, and debt ratings of “bb+” on the $ 15 million and $ 10 million floating notes, and “bb” on the $11 million subordinated floating notes, all due in 2034, issued by SVBH. Best also assigned a “bb+” rating on the £50 million ($89 million) convertible bonds due in 2008, also issued by SVBH. The outlook for all the ratings is stable.

“The ratings of syndicate 2147 reflect support provided by the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates,” said Best. It also said it “believes syndicate 2147’s financial flexibility is enhanced by continued support provided by its parent, which may have the capability to raise additional funds if required.

“The syndicate’s capacity for the 2006 year of account has been reduced to £240 million ($430 million), down from £286 million ($491.9 million) in 2005. The reduction has been made to reflect some anticipated softening in rates for certain classes (principally liability) and the sale of the Fusion book, although these factors are likely to be partially offset by an upturn in rates for some direct property business and catastrophe reinsurance.”

Concerning Syndicate 1007, Best said it believes it is “likely to produce solid returns for the 2003 – 2005 years of account and has begun to recover from poor results arising from discontinued U.S. liability business, which has negatively impacted the syndicate for several years.”

Best forecasted a “solid performance (after personal expenses) for syndicate 1007 of 20 percent of capacity for the 2003 year of account and 10 percent for 2004 (in line with the syndicate’s September 2005 Quarterly Monitoring Return).”

However, the rating agency noted: “An offsetting factor arises from the 2002 year of account, which remains open due to material uncertainty relating to reserves for discontinued liability lines. Future financial performance of syndicate 1007 is likely to continue to be supported by its strategy of trading in the areas where stronger rating conditions are experienced.”

Best said it believes that Syndicate 1007 has “been able to establish an excellent profile for certain specialist classes, which is demonstrated by the volume of business it leads (approximately 60 percent of its premium volume in 2005). Business is written in the following specialist units: financial institutions, professional indemnity, political and credit risks, management liability, specie, cargo and special situations. The account has a U.K. and U.S. bias (42 percent and 20 percent of gross premiums, respectively). A.M. Best believes that a disadvantage of the syndicate’s specialist approach is the concentration of risks written in certain sectors, particularly business written for financial institutions.”

Best also forecast “solid profits” for Syndicate 2147 of around 18 percent of capacity “(after personal expenses) for 2003 and 10 percent for the 2004 year of account—in line with the syndicate’s September 2005 Quarterly Monitoring Return.”

However, Best also indicated that as a result of the 2005 U.S. hurricanes, it believes the 2005 year of account is likely to produce a small loss. But the rating agency also noted that it “anticipates that the future financial performance of syndicate 2147 will benefit from hardening rates in 2006 in its property classes and reduced exposure to some liability classes where rates are softening.”

Best also said it “believes that the syndicate has been able to establish an excellent profile, which is demonstrated by the volume of business it leads—approximately 42 percent of its premium volume in 2005.” The bulletin indicates “Syndicate 2147 has become a diversified operation, with the property book likely to account for 43 percent of gross premiums in 2005, general liability 37 percent, marine 10 percent and aviation 10 percent. The syndicate has a U.K. and U.S. focus, with these regions accounting for 60 percent and 23 percent of 2005 gross premiums.”

Best concluded that it “believes the efforts of the syndicate’s management to develop non-traditional sources of business via electronic hubs for the Novae book will assist in raising awareness of the syndicate’s brand name in the United Kingdom.”

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