Ratings Roundup: AXIS, Itau XL, Topiary/Platinum

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and the issuer credit ratings (ICR) of “a+” of Bermuda-based AXIS Specialty Limited (AXIS) and its operating affiliates. Best also affirmed the ICR of “bbb+” and all existing debt ratings of AXIS Capital Holdings Limited. The outlook for all ratings is stable. “The ratings of AXIS reflect its continued strong operating performance, excellent risk-based capitalization, solid risk management controls and its highly experienced management team,” Best explained. “AXIS’ operating strategy is to maintain a diversified book of business, both geographically and by line of business, with a focus on broker sourced short- and medium-tail lines, principally specialty insurance lines including property, marine, aerospace and political risk, along with property catastrophe reinsurance coverage and other specialty reinsurance coverages. The company also has selectively expanded into professional lines and umbrella and excess liability coverages. AXIS’ overall operating performance has been consistently strong with a six-year average combined ratio of 80.5% and a six-year average return on equity of 17.9%, both of which place the company among the leaders in its Bermuda peer group. AXIS’ excellent performance is directly attributable to its well-established risk management controls and systems. Furthermore, AXIS continues to maintain a very strong level of risk-based capitalization under A.M. Best’s stress scenarios.”

Standard & Poor’s Ratings Services has assigned its ‘BBB-‘ and ‘brAAA’ (Brazil national scale) long-term counterparty credit ratings to Itau XL Seguros Corporativos S.A. (Itau XL) with a stable outlook. “The ratings on Itau XL reflect our group methodology, which considers the insurance company as a strategically important subsidiary of Banco Itau S.A. (BBB/Stable/A-3),” S&P explained. “They also reflect the insurer’s market presence in the Brazilian Commercial Lines Insurance market, very strong capital levels, and good operating performance. These positive factors are mitigated by the small size of the company operating in a strong competitive environment in the Brazilian property and casualty (P&C) market. In 2006 Itau Seguros S.A. established a joint venture with XL Insurance to create Itau XL, a company focused on P&C insurance. Itau Seguros’ transferred its P&C portfolio to Itau XL.”

Standard & Poor’s Ratings Services has assigned its ‘BB+’ senior secured debt rating to Topiary Capital Ltd.’s (Topiary) $200 million Series 2008-1, Class A Principal-at-Risk variable-rate notes. “The rating on the notes is based on the probability of attachment as modeled by Risk Management Solutions (RMS)” [See related article]. S&P said that while it does not maintain a public rating on Platinum Underwriters Bermuda Ltd., Topiary’s counterparty, “it does maintain a public counterparty credit rating on its parent, Platinum Underwriters Holdings Ltd. (BBB/Stable/–). S&P said that in assigning the rating on the notes it had “evaluated the role of Platinum as a party to various transaction documents and believes the rating reflects any credit risk from Platinum. These are second-event notes and once on risk, are exposed to losses resulting from any combination of U.S. hurricanes and earthquakes, European windstorms, and Japanese earthquakes, on a per occurrence basis. Once an annual risk period begins, two covered events must occur within the risk period for note holders to incur a loss.”