Best Affirms Alliance Re’s ‘B++’ Ratings

A.M. Best Co. has affirmed the financial strength rating of “B++” (Very Good) and the issuer credit rating (ICR) of “bbb” for Cyprus-based Alliance International Reinsurance Public Company Limited with a stable outlook.

“The ratings reflect Alliance Re’s solid prospective capitalization and improving business profile,” said Best. “An offsetting factor is the high expense ratio, although some improvements are expected in the medium term.”

Best said it “believes that Alliance Re’s risk-adjusted capital position is likely to be solid and supportive of the projected net premium growth in 2006 and 2007, while the capital base is expected to improve at approximately 3-5 percent each year.”

The rating agency also indicated that in its view “Alliance Re’s business profile is improving as the company diversifies its sources of premium income through new strategic partnerships established in 2005 and 2006, which are likely to account for approximately 10-15 percent of gross premium income over the next two years.”

Best also said that in its opinion “Alliance Re’s underwriting performance is likely to improve in 2006 and 2007 with a prospective very good combined ratio of approximately 95-98 percent, compared to 100.8 percent in 2005. However, in A.M. Best’s view, the expense ratio is likely to remain high at approximately 35 percent in 2007 despite an expected decrease from the very high level of 39.2 percent in 2005. This improvement is projected to be driven by stable forecasted operating costs while net premium income is likely to grow by a good 10 percent-15 percent.”