Ratings: MAPFRE RE, Novae, Syndicate 2007, Infrassure, Glacier Re, CLICO

August 22, 2008

A.M. Best Co. has affirmed the financial strength rating of ‘A+’ (Superior) and the issuer credit rating (ICR) of “aa-” of Spain’s MAPFRE RE, Compania de Reaseguros, S.A. with a stable outlook. “The ratings reflect MAPFRE RE’s integral role within the MAPFRE group (Spain), its strong risk-adjusted capitalization and robust underwriting results,” said Best. “An offsetting factor is MAPFRE RE’s high organic growth rate in respect of third-party business.” Best added that in its view “MAPFRE RE has a strong level of risk-adjusted capitalization as retained earnings compensate for high growth.” Best also indicated that it expects MAPFRE RE’s capitalization to remain at the same level, and to “support further growth, despite the dividend requirements by the parent company.” Best added that it “expects overall underwriting performance to remain robust in 2008, despite further pressure on prices in non life insurance, which is likely to lead to a deterioration in the combined ratio to approximately 93 percent-95 percent (compared to 90 percent in 2007) due to a higher claims ratio.”

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating (ICR) of “a-” of the UK-based Novae Insurance Company Limited (NICL) with stable outlooks. Best also affirmed Novae’s Lloyd’s Syndicate ratings (See following). Best said it believes that NICL would “maintain excellent risk-adjusted capitalization in 2008, supported by an increase in retained earnings. Additionally, NICL benefits from the financial flexibility of its parent company, Novae Group plc (NG), which has demonstrated its ability to raise funds to support the group’s growth.” NICL is expected to produce a pre-tax profit in 2008 of between £2 and £4 million ($3.71 to $7.42 million), compared to £1.9 million ($3.53 million) in 2007, “supported by solid earnings from the company’s conservative investment portfolio.” However, Bests said it anticipates an underwriting loss, “underpinned by a loss ratio in excess of the 59 percent achieved in 2007. Earnings are likely to be impacted by deteriorating rates across the portfolio and reserve strengthening for regional professional indemnity business

Along with its affirmation of NICL (above), A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating (ICR) of “a+” of Lloyd’s Syndicate 2007, managed by Novae Syndicates Limited (NSL). Best also affirmed the ICR of “bbb” of Novae Group plc (NG) and the debt ratings of “bbb” on the £50 million ($92.8 million) convertible bond and “bbb-“on the £100 million ($185.6 million) subordinated note, both issued by NG. In addition Best affirmed the ICR of “bbb-” of Novae Holdings Plc (NH) and the debt ratings of “bbb-” on the $15 million floating rate note, “bb+” on the $11 million floating rate subordinated loan note and “bbb-“on the $0 million floating rate note, all issued by NH. The outlook for all ratings remains stable. Best said the “ratings of syndicate 2007 reflect the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates. In addition, A.M Best believes that the syndicate benefits from the financial flexibility of its parent company (NG), which is expected to maintain strong risk-adjusted capitalization in 2008. Capacity is unchanged at £360 million [$668 million] for the 2008 year of account, to allow the syndicate to capitalize on new initiatives and growth opportunities within the more profitable segments of the portfolio, while cutting back on business where rates are unfavorable.” Best expects the Syndicate to make a “good operating profit (on an annually accounted basis) in excess of £35 million [$65 million] in 2008, assuming normal catastrophe activity.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and the issuer credit ratings (ICR) of “a-” of Swiss insurer Infrassure Ltd. and its subsidiary, Infrassure Ltd., Vaduz, which is domiciled in Liechtenstein). The outlook for all ratings is stable. “The ratings of Infrassure reflect its strong niche business position as a leading technical lines insurance specialist, its strong earnings despite a deterioration expected in 2008 and adequate risk-adjusted capitalization. The ratings of Infrassure Vaduz reflect the full rating enhancement from the explicit group support in the form of a quota share reinsurance agreement with the parent company.” Best added that it “believes Infrassure continues to improve its business position as a recognized engineering insurance specialist, benefiting from the ongoing strong world-wide insurance demand for infrastructure projects.”

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit ratings of “a-” of Switzerland’s Glacier Reinsurance AG (Glacier Re) and its subsidiary, Liechtenstein-based Glacier Insurance AG. The outlook on all of the ratings remains stable. “The ratings of Glacier Re reflect its excellent prospective risk-adjusted capitalization, good technical performance and developing business profile,” Best explained. Offsetting factors are deterioration in risk-adjusted capitalization to year-end 2007 due to higher than anticipated growth. The ratings of Glacier Insurance reflect the reinsurance support of its parent company in the form of a 95 percent quota share agreement.” Best added that despite weakening in 2007, it “anticipates that Glacier Re will maintain excellent risk-adjusted capitalization during 2008 and 2009, supported by full retention of earnings and stabilization in growth.

A.M. Best Co. has downgraded the financial strength rating (FSR) to ‘B’ (Fair) from ‘B+’ (Good) and issuer credit rating (ICR) to “bb” from “bbb-” of CLICO (Bahamas) Limited, and has given both ratings a negative outlook. CLICO Bahamas is an insurance member company of CL Financial Limited (CL Financial), a diversified holding company based in Trinidad and Tobago. Best said the “downgrades reflect the significant exposure CLICO Bahamas has to affiliated loans as a percentage of assets and capital, the volatility of earnings in its international operations and its somewhat modest market share in the Bahamas, when compared to its competitors. CLICO Bahamas’ loan to a real estate subsidiary, which represents a concentration risk and high exposure to the depressed Florida real estate market, has been revalued to reflect the current market conditions. A.M. Best feels that given most of its reserves are fixed annuities, this real estate exposure represents a mismatch to CLICO Bahamas’ liabilities. In addition, certain of its non-Bahamas regions have produced operating losses.”

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