Best Affirms Cologne Re, Subs ‘A++’ Ratings

A.M. Best has affirmed the financial strength rating (FSR) of “A++” (Superior) and the issuer credit rating (ICR) of “aa+” for Koelnische Rueckversicherungs-Gesellschaft AG (Cologne Re), the German-based subsidiary of Berkshire Hathaway’s General Re (See related ratings article in National).

Best also affirmed the “A++” and “aa+” ratings for Cologne Re’s subsidiaries, General Reinsurance Life UK Limited, General Reinsurance Africa Limited, and General Reinsurance Life Australia Ltd. The outlook on all ratings is stable.

“These rating actions reflect Cologne Re’s very strong consolidated capitalization, its excellent business profile in life reinsurance, improving profitability, and the explicit support from Berkshire Hathaway through a net worth maintenance agreement,” said Best. “An offsetting factor is the declining business profile in some international non-life reinsurance markets.”

Best said that in its view, “Cologne Re is maintaining a very strong risk-adjusted capitalization, partially due to its further increased equity. Cologne Re’s overall 2005 reserve run-off has been favorable in 2005 which reflects the group’s conservative reserve position.”

The Company also has an “excellent business profile in the global life and health reinsurance markets while its premium volume in non-life reinsurance has declined in some international markets.”

Best said it “expects the group’s life premium income to increase slightly in 2006 as the business continues to grow, in particular in Asia, Australia and South Africa. The non-life business, however, is expected to continue to decline in 2006 following the run-off of the finite reinsurance business. Cologne Re’s life/health results are expected to maintain strong in 2006. The non-life underwriting results are likely to deteriorate slightly in 2006 (with a combined ratio of approximately 98-99 percent).”

The report also noted that Best’s “rating of Faraday Reinsurance Co. Limited [Gen Re’s Lloyd’s operation] remains unchanged until A.M. Best has concluded its annual review and expects to conclude the review in the next two months.”

In a separate related announcement Best said it has “removed Cologne Reinsurance Company (Dublin) Ltd. (CRD) from under review and affirmed the financial strength rating of ‘A-” (Excellent) and the issuer credit rating (ICR) of “a-“, with a stable outlook.”

Best said the rating actions reflect its “expectations of an orderly run-off of CRD’s financial reinsurance portfolio. The company ceased to underwrite new business in November 2004.” Best also expects “CRD’s risk-adjusted capitalization to remain supportive of the current rating and to be managed in line with the run-off profile of the company.”