Ratings: Swiss Re (Canada), New India, Transsib Re, HDI, Willow Re (Notes), Euro Arab

February 3, 2009

A.M. Best Co. has withdrawn the financial strength rating (FSR) of ‘A+’ (Superior) and issuer credit rating (ICR) of “aa-” of Swiss Reinsurance Company Canada and has assigned a category NR-5 (Not Formally Followed) to the FSR and an “nr” to the ICR. “These rating actions follow the transfer of all business of Swiss Re Canada to the Canadian branch of its ultimate parent, Swiss Reinsurance Company,” Best explained. “The FSR of ‘A+’ (Superior) and ICR of “aa-” of Swiss Re are unchanged. Best also noted that the “business transfer is part of Swiss Re’s corporate restructuring efforts to streamline operations. Swiss Re has made similar business transfers and mergers of several European subsidiaries as part of its plan to optimize its legal entity structure in the European Union.”

A.M. Best Co. has affirmed the financial strength rating (FSR) of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of The New India Assurance Company Limited. Best also assigned an FSR of ‘A-‘ (Excellent) and an ICR of “a-” to The New India Assurance Company Limited (New Zealand Branch) (NZB). The outlook for all ratings is stable. Best said: “The ratings reflect New India’s strong risk-adjusted capitalization, improving expense measures and leading business position in the Indian market. New India’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), supports its current rating level.” However, best acknowledged that the “company’s risk-adjusted capitalization is highly exposed to the Indian equity market (on a market value basis, 55 percent of its invested assets were in equities), which has negatively impacted its risk-adjusted capitalization. The BCAR, however, remains sufficient.” In addition Best noted: “New India’s business profile remains strong, with the company maintaining its leading business position in the domestic market. However, competitive pressures from other government-owned and private insurers are increasing, with New India growing at slower rates than the market for the 12 months to March 2008.”

A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of ‘B-‘ (Fair) and the issuer credit rating of “bb-” of Russia’s OJSC Transsiberian Reinsurance Corporation (Transsib Re). “The ratings of Transsib Re reflect its insufficient, although improving, risk-adjusted capitalization and good overall financial performance,” Best explained. “Main offsetting factors are its limited financial flexibility, volatility in the investment income result, lack of defined risk management techniques and projected fluctuations in the underwriting performance.” Best said the outlook revision is largely a result of what it “believes is an improving risk-adjusted capitalization despite projected unrealized capital losses on the securities portfolio. Improvement in the capital is mainly due to a shareholders’ capital injection of around RUB 60 million [$1.658 million] and an increase in the market value of the real estate investments during 2008.” Best added that in its opinion, “the capital position is supportive of projected growth of around 3 percent to 5 percent. Any substantial growth in the short term beyond these limits will add severe strain to the company. Furthermore, Transsib Re has limited financial flexibility as it depends on the retained earnings and is susceptible to major catastrophic events.”

Standard & Poor’s
Ratings Services today has affirmed its ‘BBB’ long-term counterparty credit and insurer financial strength ratings on Italy-based composite insurer HDI Assicurazioni SpA (HDI/Italia or HDI/I) with a stable outlook. At the same time, S&P withdrew the ratings at the company’s request. S&P said: “At the time of withdrawal, the ratings reflected HDI/I’s strategic importance to Germany-based Talanx Primary Insurance Group (TPG). Partially offsetting this strength was HDI/I’s weakened and restricted competitive position, constrained by size, weakened operating performance, and weakened capitalization. The stable outlook integrated our expectation that HDI/I would remain a strategically important company within TPG. It also took into account our belief that HDI/I, on a stand-alone basis, would maintain its niche position within the Italian railway sector, and be able to generate healthy technical results–although limited in absolute value–by offering credit protection in the life segment and some related non-life business. We expected HDI/I to maintain a combined ratio no higher than 102 percent and improve operating performance following assumed stabilization of the company’s financial results.”

Standard & Poor’s Ratings Services has revised its rating on Willow Re Ltd.’s Class B 2007-1 principal-at-risk variable-rate notes to ‘D’ from ‘CC’ because, S&P said, “of an imminent interest payment default.” Credit analyst Gary Martucci explained: “We had lowered our rating on the notes to ‘CC’ on Oct. 9, 2008, because of the notes’ exposure to the assets in the collateral account. “At that time, we had indicated that we believed that scheduled payments were at risk.” S&P noted that the “scheduled payment date is Feb. 2, and under the transaction documents, there is a five-day grace period until a default is triggered. We took the rating action today because the issuer has notified Standard & Poor’s that it will not have sufficient funds to make the scheduled interest payment.”

Standard & Poor’s Ratings Services has assigned its ‘BB+’ counterparty credit and insurer financial strength ratings to Jordan-based Euro Arab Insurance Group P.S.C. with a stable outlook. “Euro Arab is a listed insurer based in Amman, Jordan, which writes a composite book of general non-life, group health, and some life business in its domestic market,” S&P explained. “The ratings on the company reflect its good, still developing competitive position, its strong risk-based capital ratios and adequate overall capitalization, its satisfactory investment strategies, and good liquidity,” indicated credit analyst David Anthony. “Offsetting these strengths, however, are the increasingly competitive insurance environment in Jordan, Euro Arab’s modest size by international standards, and a sometimes marginal operating performance that has proven volatile in the past, although recent performance appears more adequate,” he added. S&P also noted that, “although day-to-day risk management processes appear effective, overall Enterprise Risk Management is somewhat weak by the standards of international best practice.” In addition S&P explained that the “stable outlook reflects our expectation that previously rapid annual premium growth well in excess of 30 percent per annum will significantly moderate in 2009, although Euro Arab will continue to maintain a business and financial profile at least consistent with the current rating level, with technical ratios and results generally at or around Jordanian market averages. Operating performance is expected to stabilize at adequate levels compared with previous volatility, with return on revenues at or above 10 percent, return on equity of at least 15 percent, and adjusted combined ratios comparable with or, at worst, only slightly worse than market averages on each main line of business

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