Ratings Recap: Green Valley (Swiss Re), Aviva Canada, CSOB Pojistovna, Harbor Point Re, Hiscox

December 27, 2007

Standard & Poor’s Ratings Services has assigned its ‘BB+’ debt ratings to the €200 million ($292 million) Class A Series 1 Principal At-Risk variable-rate notes due Jan. 10, 2011 issued by Green Valley Ltd. The transaction closed on Dec. 27, 2007, at which time the rating was assigned to the notes. “Catastrophe bonds of this type are well-established risk management tools for insurance and reinsurance companies to transfer peak risks in certain parts of the world into the capital markets,” explained S&P credit analyst Cameron Heath. S&P noted: “The notes were issued by Green Valley, a special-purpose, Cayman Islands-exempted company whose ordinary shares are held in charitable trust. The proceeds of the notes were invested in high-quality assets within a collateral account. The issuer swaps the total return of the asset portfolio with Swiss Re Financial Products Corp. (SRFPC; AA-/Stable/A-1+) in exchange for quarterly EURIBOR-based payments. Simultaneous to the issuance of the notes, Green Valley entered into an International Swaps and Derivatives Association (ISDA)-based counterparty contract comparable to a reinsurance contract with Swiss Reinsurance Co. (Swiss Re; AA-/Stable/A-1+). This contract will provide for payments to Swiss Re if a windstorm of a certain magnitude occurs within France.”

Standard & Poor’s Ratings Services has assigned its ‘A+’ long-term counterparty credit and financial strength ratings to S&Y Insurance Co. S&P also affirmed the counterparty credit and financial strength ratings on: Aviva Insurance Co. of Canada; Elite Insurance Co.; Pilot Insurance Co.; Scottish & York Insurance Co. Ltd.; and Traders General Insurance Co. These companies are the primary operating subsidiaries of Toronto-based insurance holding company Aviva Canada Inc. (not rated), collectively “Aviva Canada.” The outlook on all of the ratings is stable. “The ratings on Aviva Canada reflect its position as the second-largest property and casualty insurer in Canada with about 9 percent market share, good multichannel distribution network, good product mix, robust capital position, strong support from parent, and very conservative and liquid investment portfolio,” explained S&P credit analyst Foster Cheng. The company faces challenges from its lack of brand awareness in the Canadian market, past strategy execution issues, a competitive market, and its high auto insurance exposure.”

Standard & Poor’s Ratings Services has raised its long-term counterparty credit and insurer financial strength ratings on Czech Republic-based insurer CSOB Pojistovna, a. s. to ‘A-‘ from ‘BBB+’ and assigned a stable outlook. “The upgrade reflects further strengthening of CSOB Pojistovna’s strategic importance to its parent, Belgium-based KBC Insurance N.V. (AA-/Stable/–),” said S&P. “We have factored three notches of implied group support into the ratings, reflecting the increased integration of the company within the KBC group. The ratings also continue to reflect CSOB Pojistovna’s good capitalization, which is offset by its modest competitive position and historically marginal operating performance.”

Standard & Poor’s Ratings Services has assigned its ‘A-‘ counterparty credit and financial strength ratings to U.S.-based Harbor Point Reinsurance U.S. Inc. (HP US), a subsidiary of Bermuda-based operating company Harbor Point Re Ltd. (Harbor Point). S&P also said that it affirmed its ‘A-‘ counterparty credit and financial strength ratings on Harbor Point Re. The outlook on both these companies is stable. “The ratings on HP US reflect our view that the company is a core subsidiary of Harbor Point,” noted S&P credit analyst Laline Carvalho. Previously called Quadrant Indemnity Co., Harbor Point acquired HP US from Chubb Corp. on Jan. 2, 2007. HP US had capital of $506 million as of Sept. 30, 2007.

Standard & Poor’s Ratings Services has revised the outlook on the long-term counterparty credit and insurer financial strengths ratings of U.K.-based non-life insurer Hiscox Insurance Co. Ltd. (HISCO), a core operating entity of Bermuda-based non-life insurer Hiscox Group (Hiscox), to positive from stable. “This reflects the enhanced strategic flexibility afforded the group by its improved competitive position,” said S&P. It also affirmed the ‘A-‘ ratings. “The ratings reflect the group’s strong competitive position, strong capitalization, and strong recent operating performance,” indicated S&P credit analyst Nigel Bond. “Offsetting these positive factors is uncertainty surrounding the group’s ability to continue to produce a strong level of earnings across the pricing cycle.”

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