Ratings: Syndicate 2003 (Catlin), La Colonial, United, Arch, Ballantyne Re

September 2, 2009

A.M. Best Co. has affirmed the Best’s Syndicate Rating of ‘A’ (Excellent) and issuer credit rating of “a+” of Lloyd’s Syndicate 2003, which is managed by Catlin Underwriting Agency Limited (CUAL), a member of the Bermuda-based Catlin Group Limited (CGL), with a stable outlook. [See related article at: https://www.insurancejournal.com/news/international/2009/09/02/103451.htm] . Best indicated that its ratings of syndicate 2003 “reflect the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates.” In addition best said it “believes syndicate 2003 benefits from financial flexibility provided by CGL, which is expected to maintain excellent consolidated risk-adjusted capitalization in 2009. The syndicate’s net premium income is expected to increase by approximately 25 percent for the 2009 year of account, reflecting the group’s expansion in the United States and the cessation of the 12.5 percent quota share reinsurance arrangement with third-party members, which was in place for the 2007 and 2008 years of account.” Best added that on an annually accounted basis it expects an improvement in syndicate 2003’s pre-tax profit in 2009 from £16.9 million [$27.33 million] in 2008, underpinned by solid underwriting performance and a positive return from its conservative investment portfolio. The combined ratio should be of approximately 95 percent, compared to 97.9 percent in 2008, assuming normal catastrophe activity. Rate increases for catastrophe-exposed classes of business are likely to be partially offset by continued weak market conditions for casualty business. Additionally, results will be negatively affected by the high incidence of single large losses experienced in 2009. On a year of account basis, a solid return on capacity is anticipated for 2007, reflecting favorable market conditions for U.S. catastrophe-exposed business (following the 2005 hurricanes) and a relatively benign claims environment. A positive return on capacity is also expected for the 2008 year of account, in spite of the impact of the 2008 hurricanes. Results on both years of account are likely to be affected by the volatility in the financial markets. Best also said: “Syndicate 2003 benefits from a robust business profile in the London market, where it underwrites a well diversified portfolio of property and casualty risks. Business is primarily derived from its large network of worldwide brokers. Additionally, business is written through the group’s U.S. subsidiaries on a cover holder basis, providing the syndicate with access to business that normally would not be available to the London market. Despite concerns about weak market conditions in the U.S. market, particularly for casualty business, Best believes that the level of premium income from this business is likely to be small relative to the size of the syndicate’s total portfolio.”

A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating of ‘B++’ (Good) and issuer credit rating of “bbb+” of the Dominican Republic’s La Colonial, S.A. Compania de Seguros, both with stable outlooks. Best noted that it had place La Colonial’s ratings under review on June 24, 2009 “due to continued delays surrounding receipt of critical information necessary to conclude A.M. Best’s rating process. However, La Colonial has since complied with all requests for information.” Best said the ratings affirmation “reflects La Colonial’s consistently profitable operating results, adequate capitalization and conservative underwriting philosophy. La Colonial has maintained consistent operating performance through careful risk selection with a focus on profitability. The company’s underwriting discipline and consistent levels of investment income have resulted in historically favorable earnings, and this has enabled La Colonial to continue to enhance its risk-adjusted capitalization. In recent years, operating results have been augmented by increased underwriting controls and conservative operating strategies. La Colonial’s financial strength also is enhanced by its level of reserves, along with the liquidity of its investments and comprehensive reinsurance program. Partially offsetting these strengths is La Colonial’s limited financial flexibility, the concentration of its business in the Dominican Republic and rising reinsurance costs associated with the increased frequency of catastrophic events.

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit ratings of “a-” of United Insurance Company and its subsidiary, United Re (Europe) S.A., both of which are domiciled in the Cayman Islands. The outlook for all of the ratings is stable. Best said the “ratings reflect United’s adequate capitalization, strong strategic relationship with its sponsoring shareholders and its market presence as an alternative risk capacity vehicle. All captive clients of United are managed by Aon Global Insurance Managers (Aon) or are self managed captives and/or are shareholders of United. Aon also manages United (and its subsidiaries).” Best also indicated it would continue to monitor United’s ability to manage its large ceded balances.”

Fitch Ratings has assigned its ‘A+’ Insurer Financial Strength (IFS) ratings to the following subsidiaries of Arch Capital Group Ltd. Arch Reinsurance Company; Arch Reinsurance Europe Underwriting Limited; Arch Insurance Company; Arch Excess and Surplus Insurance Company; Arch Specialty Insurance Company; Arch Indemnity Insurance Company and Arch Insurance Company (Europe) Limited. The outlook on all of the ratings is stable. Fitch said the newly assigned ratings are based on its decision to expand its ratings coverage of companies in the Arch group. These new ratings are equivalent to Fitch’s existing ‘A+’ IFS rating on ACGL’s Bermuda-based lead operating subsidiary, Arch Reinsurance Ltd. (Arch Bermuda). Fitch’s last rating actions on Arch Bermuda and ACGL came on March 31, 2009 when it affirmed the companies’ existing ratings with Stable Rating Outlooks as part of a normal annual review and stress test review. The subsidiary ratings are the same as that of the lead operating company due to Fitch’s decision to apply a group rating approach within the context of its methodology that discusses ratings of affiliates within an insurance group. The use of a group rating is based largely on the existence of reinsurance contracts in place between the various ACGL subsidiaries. Fitch views these reinsurance contracts as evidence of ACGL’s willingness to provide financial support to the subsidiaries on an on-going basis. The ratings also reflect the importance of several of the subsidiaries to ACGL due to the market access and operating platforms they provide.

Fitch Ratings has revised the Rating Watch on the Class A-2, series B series of notes issued by Ballantyne Re to Rating Watch Negative from Evolving following. The class A-2, series B notes are supported by a financial guarantee insurance policy provided by Assured Guaranty (UK) Ltd., Fitch explained. It said the rating watch revision of the Ballantyne Re notes mirrors its “recent action on Assured Guaranty’s ‘AA’ Insurer Financial Strength (IFS) rating.” Ballantyne Re is a special purpose public limited company incorporated and registered in Ireland. The company was established for the limited purpose of entering into a reinsurance agreement and conducting activities related to the notes’ issuance. Ballantyne Re issued the notes to finance excess reserve requirements under Regulation XXX for the block of business ceded under the reinsurance agreement.

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