Ratings Roundup: TTB/TTI Club, Oman Insurance, Trust Re

June 15, 2009

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of the Bermuda-based Through Transport Mutual Insurance Association Limited (TTB), and its wholly owned subsidiary, the UK-based TT Club Mutual Insurance Limited (TTI). The two companies collectively trade as TT Club. The ratings of TTI continue to reflect Best’s view that the “company is an integral part of TT Club’s worldwide strategy.” The outlook for both ratings remains stable. Best said also said it “believes TT Club will maintain strong consolidated risk-adjusted capitalization in 2009, despite an anticipated reduction in retained earnings. Capitalization is supported by a $30 million subordinated loan (issued in October 2006), and the club benefits from a comprehensive catastrophe reinsurance program with extensive vertical and horizontal protection.” However, Best also indicated that it “expects TT Club to continue to report a combined ratio above 100 percent in 2009 in line with 2006-2008. The club’s investment earnings are unlikely to offset underwriting losses, owing to ongoing disruption in the financial markets.” Best anticipates a pretax loss for the year. TT Club has taken measures to improve underwriting profitability, including the restructuring of its management in 2008 in order to reduce its expense base. However, Best said it doesn’t believe that “a significant improvement in the club’s operating performance” is likely. In Best’s opinion, TT Club has a good specialist business profile in the international marine transport and logistics insurance market, underpinned by a superior service provision. This is likely to support high policyholder retention in 2009 (2008: over 90 percent).

A.M. Best Co. has affirmed the financial strength rating of ‘A ‘(Excellent) and issuer credit rating of “a” of Oman Insurance Company (PSC) (OIC), which is based in the United Arab Emirates. The outlook for both ratings is stable.”The ratings of OIC reflect its adequate level of risk-adjusted capitalization, excellent underwriting performance and established business profile in the United Arab Emirates (UAE) insurance market,” Best explained. The company’s “volatile investment performance, stemming from a weak investment strategy” is an offsetting factor. Best said that in its opinion “OIC’s risk-adjusted capitalization remains supportive of the current ratings, despite deterioration of its fair value of investments reserves, resulting from falling equity prices.” Best also indicated that it “expects OIC’s capital base to benefit from prospective changes in investment policy, which is anticipated to reduce exposure to the volatile equity markets, with a movement into more secure investments.” However, further deterioration in the company’s capital position is likely to increase downward pressure on the current ratings.

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit rating (ICR) of “a-” of Bahrain-based Trust International Insurance & Reinsurance Company B.S.C. (c) Trust Re, both with stable outlooks. “The ratings reflect Trust Re’s strong risk-adjusted capitalization, excellent operating performance and continuously improving business profile,” said Best. “An offsetting factor is its low premium retention level.” Best also indicated that it believes that Trust Re’s “prospective risk-adjusted capitalization is strong and is expected to remain supportive of its organic growth of up to 10 percent per annum and its targeted increase in retention level to 65 percent by year-end 2010. Additionally, Trust Re benefits from improved risk management and modeling capabilities, which is likely to provide prudent risk control measures to manage its increasing business profile. Best also expects Trust Re’s operating performance “to remain excellent” with projected consolidated pre-tax profits between $25 and $30 million annually over the next two years and a combined ratio of around “85 percent, supported by strict underwriting guidelines and controlled expense allocation below 25 percent. Investment returns remained healthy at approximately 4 percent in 2008, mainly resulting from Trust Re’s strategic placements, predominantly in insurance companies, which have outperformed the market. Best also noted that Trust Re’s business profile seems to be “continuously improving and is likely to grow following its strategy of geographic expansion and further diversification by business lines.

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