Best Affirms Hiscox Lloyd’s Syndicate 33 ‘A’ Ratings

September 18, 2008

A.M. Best Co. has affirmed the Best’s Syndicate Rating of ‘A’ (Excellent) and issuer credit rating (ICR) of “a+” of Lloyd’s Syndicate 33, which is managed by Hiscox Syndicates Limited (HSL). Best also affirmed the ICR of “bbb+” of the group’s ultimate parent holding company, Hiscox Ltd. (Bermuda). The outlook for these ratings is stable.

In a related announcment, Best also upgraded its ratings on Hiscox and its operating companies.

In addition Best affirmed the ICR of “bbb+” of the group’s intermediate U.K. holding company, Hiscox plc. Concurrently, Best has withdrawn the rating and assigned the ICR an “nr”.

Best said that in its “opinion, syndicate 33’s financial strength is supported by the excellent consolidated risk-adjusted capitalization of Hiscox Ltd. and the internal group reinsurance provided by Hiscox Insurance Company (Bermuda) Limited (Hiscox Bermuda).

“Hiscox Ltd., through its corporate Lloyd’s Name, Hiscox Dedicated Corporate Member (HDCM), owns 72.5 percent of the syndicate’s capacity in 2008. The remainder is owned by third party corporate members and private individual members. Syndicate 33’s financial flexibility is enhanced by the support of Hiscox Ltd. and the provision by a bank of a £120 million [$ 217 million] revolving loan facility to provide liquidity should the syndicate need to pay large claims prior to making recoveries from reinsurers.” Best also noted that syndicate 33 “maintains prudent reserves with a margin above actuarial best estimate. In 2007, the syndicate released €35.4 million [$64 million] from prior year reserves.”

Best said it “believes that syndicate 33 is likely to produce a good financial result in 2008, supported by continued good rate adequacy and the syndicate’s comprehensive strategy for managing its business in a softening market environment. The combined ratio is expected to be below 95 percent on an annually accounted basis, a deterioration from 86.6 percent in 2007 as a result of decreasing rates for many of the classes of business underwritten by the syndicate. Performance in the last two years has been supported by strong rates for catastrophe-exposed classes following severe hurricane activity in 2005. In 2007 and 2008, rates for catastrophe-exposed business have reduced, but not sufficiently to completely reverse the gains made. Additionally, the syndicate’s emphasis on the renewal of existing business and its containment of aggregates is likely to protect its profitability as rates in the wider market decline.”

In addition Best noted that “Syndicate 33 has an excellent business profile within Lloyd’s. The syndicate is the fifth largest in Lloyd’s measured by stamp capacity and writes a well diversified account, leading a significant proportion of its business (approximately 50 percent anticipated in 2008). A.M. Best believes that the syndicate’s profile is enhanced by its close working relationship with other Hiscox group entities, including Hiscox Insurance Company Limited (United Kingdom), Hiscox Bermuda and Hiscox Insurance Company (Guernsey) Limited (Guernsey).

Source: A.M. Best –

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