Ratings Recap: TT Club, Heddington, Flagstone Re, Grupo Nacional, Seguros Catalana, ACE Limited, HSB Engin

June 3, 2008

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of Bermuda-based Through Transport Mutual Insurance Association Limited (TTB) and its wholly owned subsidiary, the UK-based TT Club Mutual Insurance Limited (TTI), formerly known as Through Transport Mutual Insurance Association [EurAsia] Limited. The two companies collectively trade as TT Club. Best said the ratings of TTI continue to reflect its view that the “company is an integral part of TT Club’s worldwide strategy.” The outlook for both ratings remains stable. Best also indicated that it believes TT Club “will maintain excellent risk-adjusted capitalization in 2008-2009, despite some weakening in 2007. The company continues to benefit from a comprehensive catastrophe reinsurance program, which has the advantage of extensive vertical and horizontal protection. A $30 million subordinated loan (issued in October 2006) also contributes to its strong level of capitalization.” Best also anticipates that TT Club will report combined ratios in the region of 105 to 110 percent in 2008-2009, in line with its 108 percent combined ratio in 2007. TT Club is therefore likely to remain dependent on investment income to generate a profit over this period, making it vulnerable to falling interest rates and current uncertainty in financial markets.”

A.M. Best Co. has assigned an issuer credit rating (ICR) of “a+” and affirmed the financial strength rating (FSR) of ‘A’ (Excellent) of Bermuda-based Heddington Insurance Limited, both ratings have a stable outlook. “The ratings reflect Heddington’s superior capitalization, consistently positive operating results and the role that the company plays as a captive insurance company of Chevron Corporation, Best noted. “These positive rating factors are partially offset by Heddington’s high net loss exposures, as the coverages provided tend to result in claims that are characterized as low frequency but high severity. This is somewhat mitigated by the captive’s good loss history supported by very strong investment income and parental support on loans to affiliated companies.”

Fitch Ratings has affirmed its ‘A-‘ insurer financial strength (IFS) ratings on Bermuda-based Flagstone Reinsurance Limited and Flagstone Reassurance Suisse SA. Fitch also affirmed its ‘BBB+’ Issuer Default Rating (IDR) on Flagstone Reinsurance Holdings, Limited (FSR), assigned a ‘BBB+’ IDR to FSR’s Flagstone Finance S.A. subsidiary, and has assigned ‘BBB-‘ ratings to FSR’s and Flagstone Finance’s outstanding subordinated debentures. The outlook for all of the ratings is stable. Fitch said: “The ratings reflect the companies’ (collectively Flagstone) strong capital position, recent favorable operating results, and well-designed risk management practices and operating platforms. Partially offset these positives are the effects of the company’s limited operating history and comparatively small size in the global reinsurance market.” Fitch also indicated that it “believes that Flagstone uses a rigorous underwriting process to evaluate potential insured risks’ zonal aggregate limits, pricing adequacy, and return characteristics on both an individual contract and portfolio basis.”

Standard & Poor’s Ratings Services has affirmed its ‘BBB’ global scale, and ‘mxAA+’ national scale, financial strength and counterparty credit ratings on Mexican insurance company Grupo Nacional Provincial S.A.B. (GNP) with a stable outlook. “The financial strength and counterparty credit ratings reflect the company’s strong market position, brand recognition in the Mexican insurance market, and good product diversification,” explained credit analyst Alfredo Enrique Calvo. “Also, GNP has an experienced management team with strong market knowledge, and the company has improved its operating and financial performance.” The ratings are, however, constrained by GNP’s capital adequacy ratio, which lags the ratios of other, similarly rated entities, and by volatile bottom-line results.

Standard & Poor’s Ratings Services has assigned its ‘A-‘ long-term counterparty credit and insurer financial strength ratings to Seguros Catalana Occidente, S.A. de Seguros y Reaseguros, and to Bilbao, Compania Anonima de Seguros y Reaseguros S.A., both of which are core operating entities of the Spanish insurance group Grupo Catalana Occidente, S.A. y Sociedades Dependientes (GCO). The outlook for the ratings is stable. “The ratings reflect the GCO group’s very strong and stable operating performance over the cycle, its prospectively strong capitalization, and strong financial flexibility as one of only two quoted insurers in Spain,” said S&P. “These factors are offset by the group’s current lack of a significant competitive advantage, and by a short-term weakening in capitalization derived from the group’s increased shareholding in Spain-based credit insurer Compañía Española de Seguros y Reaseguros de Crédito y Caución S.A. (CyC; A/Stable/–) and Netherlands-based credit insurer Atradius N.V. (major entities rated A/Stable/–).”

Fitch Ratings has affirmed the ratings of ACE Limited and its subsidiaries with a stable outlook. “These rating actions reflect ACE’s recent strong operating performance, solid balance sheet and financial flexibility, and ACE’s diverse sources of revenues and earnings,” said Fitch. “Partially offsetting these positives is Fitch’s expectation of contracting underwriting margins related to heightened competition and reduced rates in many of ACE’s lines of business.” Fitch also said it “views ACE’s recent operating performance as strong characterized by low combined ratios, modest reserve development, and comparatively light catastrophe losses. ACE reported net income (net of preferred dividends) of $366 million at March 31, 2008 and record net income of $2.6 billion for the year ended Dec. 31, 2007 in the midst of a soft property/casualty market.”

A.M. Best Co. has affirmed the financial strength rating of A++ (Superior) and the issuer credit rating (ICR) of “aa+” of UK-based HSB Engineering Insurance Limited (HSBEIL) with a stable outlook. Best indicated that in its opinion “HSBEIL is likely to maintain excellent consolidated risk-adjusted capitalization during 2008-09, due to expected strong retained earnings. The ratings also factor financial support from its parent, The Hartford Steam Boiler Inspection and Insurance Company (HSB), reflecting HSBEIL’s importance as the group’s principal source of international growth outside the United States.”

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