Ratings: RSA (Ireland), Mondial, Tokio Marine (Guam), Ballantyne Re (Notes), Wuerttembergische

January 7, 2009

Standard & Poor’s Ratings Services has assigned its ‘A-‘ insurer financial strength and counterparty credit ratings to Ireland-based insurer RSA Insurance Ireland Ltd. with a stable outlook. “The ratings on RSA Ireland reflect its strategic importance to Royal & Sun Alliance Insurance PLC (RSA Group) and strong operating performance,” explained credit analyst Tatiana Grineva. “These strengths are partly offset by RSA Ireland’s principal exposure to the highly competitive and, in absolute terms, relatively small Irish insurance market,” she added. S&P said the “stable outlook reflects our view that RSA Ireland will remain strategically important to the RSA Group. The stable outlook also reflects that on its ultimate parent, RSA Group. Consequently, upward rating action on RSA Ireland is almost wholly dependent on the ratings on RSA Group being raised. Similarly, downward rating action on RSA Group would result in a like-for-like action on the rating on RSA Ireland.” Grineva also indicated: “Aside from rating action on the parent, the ratings could also be raised if additional planned transfers of businesses identified by the RSA Group into RSA Ireland in the medium term were to strengthen the importance of Irish operations within the Group.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A’ (Excellent) and the issuer credit rating (ICR) of “a+” of Swiss-based Mondial Assistance International AG (MAIAG) (formerly Elvia Reiseversicherungs-Gesellschaft AG) and its subsidiary, the New York-based Jefferson Insurance Company. The outlook for all ratings remains stable. Best said: “The ratings reflect MAIAG’s excellent business profile as a leading worldwide travel insurance and assistance provider, its adequate risk-adjusted capitalization and continued good operating performance. The ratings have been partially enhanced by the implicit support of the company’s ultimate parent, Allianz Societas Europaea.” Best added that “the ratings of the Jefferson Insurance Company reflect the full rating enhancement from the explicit support of MAIAG in the form of a 90 percent quota share reinsurance treaty with MAIAG. MAIAG is an integral part of Mondial Assistance AG, which is part of Allianz. Its main lines of business are travel insurance and roadside assistance, where the company has built a strong brand and an extensive know-how. A.M. Best anticipates demand for MAIAG’s products to weaken over the near term as a consequence of the current economic environment, but expects the company to maintain its solid business position through the development of direct distribution on the internet and disciplined expansion into new markets such as Mexico and BRICs and new lines of business such as healthcare and home assistance for the elderly.”

A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and the issuer credit rating of “aa-” of Tokio Marine Pacific Insurance Limited (TMPI), which is based on the island of Guam. The outlook for both ratings is stable. “The ratings reflect TMPI’s moderate risk-based capitalization on a stand-alone basis, continuous improving operating performance and strong brand name in the targeted niche segment,” Best explained. “The ratings also recognize explicit financial guarantee and operational support from TMPI’s immediate parent, Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF).” Best noted that “TMPI recorded consistent improvement in the combined ratio from 256 percent in 2003 to 78 percent in 2007. Its operating profit increased by 720 percent from 2006 after the transfer of the property and casualty (P&C) book from TMNF’s Guam branch in 2007. TMPI revised its reinsurance structure in order to strengthen its underwriting performance, terminating the quota share agreement and fully retaining its accident and health (A&H) book from September 30, 2008. The deductible level for its excess of loss treaty for the P&C book will also be doubled to $1 million in 2009. In addition to the explicit financial guarantee from TMNF, TMPI maintained a sound capital position to support its risk profile, as measured by Best’s Capital Adequacy Ratio (BCAR). Although the revision of its reinsurance structure will lead to a higher level of underwriting risk, A.M. Best believes that TMPI’s capitalization will still be maintained at a level commensurate with its ratings.”

Standard & Poor’s Ratings Services has revised its ratings on Ballantyne Re plc’s Class A-1 and Class B notes to ‘D’ from ‘CCC-‘ and ‘CC’, respectively. The rating on the Class A-1 notes had been on CreditWatch negative since Sept. 19, 2008. S&P explained: “Class A-1 noteholders were due an interest payment on Jan. 2, 2009, which was not made. Although there is a three-day cure period, the expectation is that a full payment is not forthcoming. In addition, the interest payment on the Class A-2 Series A and Series B notes, also due on Jan. 2 was not made. Payments on these notes are guaranteed by Ambac Assurance U.K. Ltd. (A/Negative/–) and Assured Guaranty (UK) Ltd. (AAA/Stable/–) respectively. Any shortfall in an interest payment is expected to be made up by these companies. Therefore, the ratings on these notes will be based on the rating on the guarantor.” Credit analyst Gary Martucci added: “We expect that there will be interest payment shortfalls on each series of Class A-3 notes as they come due. Each of these series is guaranteed by Ambac, and any shortfall will be paid by it. The rating on the Class A-3 notes will be based on the rating on Ambac.” He added that “the shortfall is due to the continued substantial decline in the market value of assets in the underlying collateral accounts. As the assets have declined in value, assets and related cash flow that would have been used to make timely payments on the rated notes are being used to satisfy credit for reinsurance requirements.” In addition, there is a minimum balance requirement in the surplus account that must be maintained for payments to be made to noteholders.

A.M. Best has withdrawn the financial strength rating (FSR) of A- (Excellent) and the issuer credit rating (ICR) of “a-” of Wuerttembergische Versicherung AG (Germany) at the company’s request and assigned the FSR a category NR-4 and the ICR an “nr”.

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