Best Affirms Glacier Re ‘A-‘ Ratings

May 4, 2007

A.M. Best Co. has affirmed the financial strength rating of “A-” (Excellent) and the issuer credit rating of “a-” of Swiss-based Glacier Reinsurance AG and its subsidiary, Glacier Insurance AG, which is based in Liechtenstein. Best also revised its rating outlook to stable from negative.

The ratings of Glacier Re reflect its excellent risk-adjusted capitalization, increasingly diversified portfolio and strong earnings. The revised outlook reflects Best’s expectation that Glacier Re’s enterprise risk management should prospectively reduce the volatility of earnings.

The ratings of Glacier Insurance are based on the strong support of the parent company in the form of a 95 percent quota share agreement.

Best noted improvements in Glacier Re’s capitalization in 2006, as shareholders’ funds were increased by $30 million, in order to compensate for higher than expected losses in 2005. Best also said a “more diversified portfolio and better catastrophe modeling has reduced the potential for large losses from natural catastrophes,” which the rating agency expects will continue to be the case.

Best indicated that in its view “Glacier Re’s effort to shift its underwriting toward less catastrophe-prone lines and primary business (through Glacier Insurance) is resulting in a more diversified portfolio in 2007. A.M. Best expects stronger premium growth in 2007 than in 2006 (by 17 percent to USD 299 million), partially due to expansion of its direct insurance portfolio and a stronger focus on the small and medium enterprise segment and energy.

“Glacier Re achieved strong earnings in 2006 with a post-tax profit of $5 million (return on premium 28.5 percent), partially due to absence of natural catastrophes but also strong underwriting performance in other lines of business (overall combined ratio 77.6 percent).”

Best believes that as a result of overall softening reinsurance rates and higher than expected natural catastrophe losses, Glacier Re’s earnings are likely to be lower in 2007 but to remain strong. It also “expects Glacier Re to continue its careful expansion in its portfolio by adhering to its strict pricing and underwriting policy.”

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