Ratings Recap: Northbridge, Credit & General, Transportation, Tenet

November 6, 2008

Standard & Poor’s Ratings Services has raised its counterparty credit and financial strength ratings on Northbridge Financial Corp.’s operating companies–Commonwealth Insurance Co., Markel Insurance Co of Canada, Lombard General Insurance Co. of Canada, and Federated Insurance Co. of Canada (collectively referred to as Northbridge)–to ‘A-‘ from ‘BBB+’. S&P has also assigned a stable outlook for the ratings of these companies. “The upgrade is based on the group’s strong competitive position, strong operating performance, strong capitalization, improved financial flexibility, and strong investments,” explained credit analyst Damien Magarelli. “Continued pricing pressure and possible volatility resulting from property catastrophe events constrain the rating.” S&P also indicated that “Northbridge’s strong competitive position is based on its well-diversified product profile by type of risk, account size, and distribution channel as well as its position as the largest commercial lines company in Canada based on premiums written. Its competitive position has improved. Northbridge, with its strong capital strength, has been able to increase its net retentions and purchase less reinsurance. As a result, it now depends less on reinsurance pricing and capacity to maintain its line size and account retentions with clients.”

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of New Zealand’s Credit & General Insurance Limited (CGIL), both with stable outlooks. Best then withdrew the all of the ratings and assigned a
category NR-5 (Not Formally Followed) to the FSR and an “nr” to the ICR following the transfer of all business and the amalgamation of CGIL into Consumer Insurance Services Limited.

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Transportation Property & Casualty Company Inc (TPCC) of British Columbia, Canada with stable outlooks. “These ratings are based on TPCC’s excellent capitalization and operating performance and its favorable profile as part of the Greater Vancouver Transportation Authority (GVTA) and BC Transit,” said Best. “Partially offsetting these positive rating factors are the company’s relatively small scale of operations and dependence on reinsurance to participate in its policyholders’ high excess coverage limits. TPCC is owned by the GVTA (90 percent) and BC Transit (10 percent), which are public transportation authorities in the Canadian province of British Columbia. TPCC is a sophisticated captive insurance company, which provides primary insurance coverage solely to these shareholders.”

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of Singapore’s Tenet Insurance Company Ltd. with stable outlooks. “The ratings reflect Tenet’s strong capitalization level and liquid investments,” said Best. They also “acknowledge the company’s efforts to expand its distribution platform.” Best also indicated that Tenet is “strongly capitalized to support its overall risk profile, as demonstrated by its strong Best’s Capital Adequacy Ratio and its low net
premium leverage. Notwithstanding the slight increase in net premium leverage from 0.29 times in 2006 to 0.34 times in 2007, the company’s local capital adequacy ratio further trended upward from 378 percent in 2006 to 395 percent in 2007. With more than 60 percent of assets allocated in cash and fixed income instruments, which are mainly short-term bonds with maturities of less than one year, Tenet maintains strong liquidity in supporting its insurance liabilities.”

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