Ratings Roundup: Berkley (Europe), Brit, Maiden, Länsförsäkringar, Ocaso

June 16, 2008

Standard & Poor’s Ratings Services has assigned its ‘A’ long-term counterparty credit and insurer financial strength ratings to U.K.-based non-life insurer W.R. Berkley Insurance (Europe) Ltd. (WRBIEL) with a stable outlook. “The rating reflects WRBIEL’s strategic importance to U.S.-based insurer W.R. Berkley Corporation (WRB), its very strong capitalization, and good earnings,” explained credit analyst Mark Coleman. S&P also noted: “WRBIEL’s specialist competitive position brings some concentration risk, and the difficult trading conditions in the U.K. professional indemnity market are expected to add both competitive and earnings pressure in 2008 and 2009. The benefits of WRBIEL’s diversification strategy have also been limited to date. WRBIEL is strategically aligned with WRB. The underwriting strategy and overall risk profile is consistent with other WRB operating units, and the level of operational oversight and control is high. WRBIEL provides a good platform for geographic diversification, and the acquisition of the 20 percent minority interest held by Kiln PLC is evidence of WRB’s continuing financial commitment.” Coleman added: “The stable outlook on WRBIEL reflects the stable outlook on the ultimate parent, WRB. As a strategically important subsidiary of WRB, we expect the rating on WRBIEL to move in tandem with downward rating actions on the parent.”

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating (ICR) of “a” of the UK’s Brit Insurance Limited (BIL). Best also affirmed the ICR of “bbb” of Brit Insurance Holdings PLC (BIH) and the ratings of “bbb-“on the $15 million floating rate subordinated notes, “bbb-“on the £20 million [$39.28 million] unsecured subordinated loan stock and “bbb-” on the £150 million [$294.57 million] fixed rate subordinated notes issued by BIH. The outlook for all ratings remains stable. Best said it “believes that BIL is likely to maintain excellent risk-adjusted capitalization, supported by solid retained earnings. Additionally, BIL benefits from the financial flexibility of the parent company, BIH, which has demonstrated its ability to raise additional capital.” Best also indicated that post-tax earnings are likely to be “in excess of
the £33 million [$64.8 million] reported in 2007, although results are likely to remain dependent upon the company’s investment earnings. The combined ratio is expected to be comparable to that achieved last year (102.7 percent). Performance is likely to be supported by the absence of large loss experience that affected the 2007 results, BIL’s prudent reserves and the benefit of its reinsurance program, which has been enhanced by the group’s use of the newly formed and independently owned protected cell company, Rockhampton Insurance PCC Limited.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and issuer credit rating (ICR) of “a-” of Bermuda-based Maiden Insurance Company, Ltd. Best also affirmed the ICR of “bbb-” of the parent holding company, Maiden Holdings, Ltd. (Holdings) (NASDAQ: MHLD). The outlook for all ratings is stable. “The ratings reflect Maiden’s excellent capitalization achieved through contributions from its parent, Maiden Holdings, Ltd., which infused the net proceeds of a private placement offering; the operational benefits derived as a 40 percent quota share partner with AmTrust Financial Services, Inc.’s (AmTrust) Bermuda reinsurance subsidiary, “AmTrust International Insurance, Ltd. (AII) and the benefits derived from AmTrust’s seasoned management team,” Best explained. “These factors are partially offset by Maiden’s limited risk-taking experience, the execution risk faced by management in achieving its business plans and the risk inherent in profitably growing its business amidst softening market conditions. Despite these concerns, the rating outlook is supported by the financial commitment of the parent company, and the close working relationship that Maiden shares with AmTrust.”

Standard & Poor’s Ratings Services has said that its “counterparty credit rating on Länsförsäkringar AB (publ) (A-/Stable/–), the intermediate holding company of the core operating subsidiaries within Länsförsäkringar Alliance (LF), and its counterparty credit and insurer financial strength ratings on non-life insurer Länsförsäkringar Sak Försäkrings AB (publ) (A/Stable/–), a core entity of LF, are unaffected by the announcement of Länsförsäkringar Liv AB’s proposed restructure to become a profit-distributing, limited liability life-assurance company.” S&P said it “believes” the demutualization of Länsförsäkringar Liv AB will have a long-term positive effect on the ratings through enhanced diversification on earnings. The financing of the demutualization is likely to increase the gearing of Länsförsäkringar AB, however, it is expected to remain in line with the tolerances of the current rating.”

A.M. Best Co. has affirmed the financial strength rating of ‘A+’ (Superior) and the issuer credit rating of “aa-” of Spanish insurer Ocaso, S.A. Seguros y Reaseguros with a stable outlook. Best said, “the ratings reflect the company’s superior risk-based capitalization, excellent operating performance and strong business profile.” However “the challenging market environment in Spain and the dependence on the funeral expenses business line,” should be considered as partially offsetting factors.

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