RatingsRounup: Allied World (Notes), ZEP-Re, Evergreen Re

November 22, 2010

A.M. Best Co. has assigned a debt rating of “bbb” to the recently issued $300 million 5.5 percent senior unsecured notes due 2020 of Bermuda-based Allied World Assurance Company Holdings, with a stable outlook. The proceeds from the debt offering will be used for general corporate purposes. “The debt-to-adjusted capital ratio and fixed charge coverage remain comfortably within the range that is commensurate with the assigned rating,” said Best. It also noted that Allied World is a diversified property/casualty insurer/reinsurer with significant geographic reach. The company has strong risk-adjusted capitalization, an experienced management team and a historically strong operating performance.”

A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of ‘B’ (Fair) and issuer credit rating of “bb+” of Kenya’s ZEP-RE (PTA Reinsurance Company) (ZEP-RE), both with positive outlooks. The ratings reflect ZEP-RE’s “robust underwriting performance and good business profile,” Best noted. The positive outlook reflects Best’s “anticipation of an improving level of risk-adjusted capitalization. The bulletin explained that ZEP-Re’s core markets consist of countries in the eastern and southern regions of the African continent, and ZEP-Re commands a compulsory cession of a proportion of treaty business within Kenya, Uganda and Tanzania.” As a result Best said it “considers that ZEP-RE’s business profile has been developing over the company’s recent history and that ZEP-Re is establishing itself as a regional reinsurer. In addition Best “considers that ZEP-RE’s level of risk-adjusted capitalization is likely to be enhanced over the coming two years through capital injections and an expanding capital base. This is further to shareholders’ funds having already grown by around 60 percent to USD 36.9 million in the two years from 2007 to 2009 in support of net premium growth over the same period of 52 percent to USD 44.3 million.” Best added that, “although ZEP-RE’s combined ratio increased from 81.3 percent in 2008 to 88.8 percent in 2009,” Best nonetheless considers that “underwriting performance has remained at a robust level and will be maintained at a similar, if not improved level in 2010 after a reasonably benign loss experience for the first half of the year.”

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a” of Bermuda-based Evergreen Reinsurance Company, Ltd., both with stable outlooks. The ratings reflect Evergreen Re’s “adequate capitalization, consistently strong operating performance and its unique role as the primary insurance carrier for its ultimate parent, Evergreen Group,” best explained. “These positive rating factors are derived from the company’s conservative underwriting standards, low cost operating structure, multiple product line book of business and broad geographic exposure base.” As offsetting factors Best noted “Evergreen Re’s deteriorated risk-adjusted capitalization over the past two years. The deterioration was due to higher investment risk and dividend payout out of USD 43 million. Evergreen Re invested USD 65 million in the bonds issued by its affiliated company—EVA Airways Corporation. Given the relative short-term maturity of the bonds issued by EVA Airways,” Best said it believes that Evergreen Re’s Best’s Capital Adequacy Ratio (BCAR) is “supportive of the current ratings; however, any further deterioration in Evergreen Re’s BCAR would create pressure on the stability of the company’s ratings going forward.” In addition Best indicated that the ratings also “reflect the strong level of commitment on the part of Evergreen Group, whose management incorporates Evergreen Re as an integral component in the overall risk management program of the group. Moreover, Evergreen Re gains from its parent’s global scope and business relationships. These commitments have been developed over the last several years and encompass risks located in a number of countries in East and Southeast Asia. Overall, Evergreen Re benefits from its parent’s strong management experience and market presence, as well as Evergreen Group’s adherence to a philosophy of providing a stable market for global insurance and reinsurance for itself and its operating subsidiaries.”

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