Ratings Roundup: Catlin (US), R.V.I., Companion, AmTrust

August 19, 2008

Standard & Poor’s Ratings Services has assigned its ‘A-‘ long-term counterparty credit and insurer financial strength ratings to Catlin Speciality Insurance Co. (CSCI) and Catlin Insurance Co. Inc. (CICI) (together Catlin US). The two companies “are expected to represent the primary U.S. based commercial lines insurance operations of the Catlin Group,” said S&P. The ratings reflect S&P’s view that “these entities constitute a core operating unit of Catlin and will add significant value to the group when conditions in the U.S. markets improve.” The rating agency also explained that the Bermuda-based Catlin Group has established Catlin US as its fourth major underwriting platform. This “brings Catlin closer to its main cedants and producers, since North America accounts for about 45 percent of Catlin’s consolidated gross premiums written,” said S&P. “The group has invested significantly in assembling a large and very experienced senior management and underwriting team to enhance its distribution and underwriting capabilities in both the admitted and non-admitted insurance markets.” Credit analyst Mark Coleman added: “Pricing trends are not conducive to large-scale expansion, so we do not expect these entities to constitute more than 10 percent of the group’s total premium income before 2010. Catlin’s main Bermuda operating company, Catlin Insurance Co. Ltd., provides a strong level of risk protection through a quota share. It has supplemented this with class-specific reinsurance protections and provided it with $130 million of capital. These factors, and low asset and liability risk, mean that the entities are strongly capitalized.” The outlook on both entities is positive and reflects the outlook on Catlin. The ratings on CSIC and CICI will move in tandem with those on the other core operating companies of the Catlin group.

Standard & Poor’s Ratings Services has placed its ‘A-‘ counterparty credit and financial strength ratings on R.V.I. Guaranty Co. Ltd., R.V.I. America Insurance Co., and R.V.I. National Insurance Co. (collectively referred to as RVI) on CreditWatch negative. “The rating action reflects that RVI’s earnings in 2008 will be significantly lower than in 2007, due largely to anticipated future losses within the passenger vehicle line of business,” explained credit analyst Damien Magarelli. RVI had strong net income in 2007 of $19 million (treating RVI’s policies as insurance policies as opposed to derivatives on a U.S. GAAP basis) and consistent with the rating, but in 2008 net income is expected to be about $1 million–less than the previous rating expectation of about $15 million. “The earnings decline in 2008 might result in the rating being lowered one-notch,” Magarelli added.

A.M. Best Co. has assigned a financial strength rating (FSR) of ‘A’ (Excellent) and an issuer credit rating (ICR) of “a” to Washington DC-based Companion Specialty Insurance Company with stable outlooks. “These rating actions follow the recent state approval of a 100 percent quota share agreement with Specialty and its parent, Companion Property and Casualty Insurance Company of Columbia, S.C.,” said Best. In May 2008, Best upgraded the FSR to ‘A’ (Excellent) from ‘A-‘ (Excellent) and the ICRs to “a” from “a-” for the Companion Property and Casualty Group and its members. “Those rating actions were based on the group’s solid capitalization, improved underwriting and operating performance, more favorable reserve development trends as well as prudently managed geographic and product diversification initiatives through its “fee for service” business,” Best explained. “The rating upgrades also recognized the significant financial support and flexibility provided by the group’s parent, Blue Cross and Blue Shield of South Carolina, which has contributed substantial amounts of capital in recent years in support of premium growth and expansion initiatives.”

A.M. Best Co. has removed from under review with developing implications and assigned a positive outlook to the financial strength ratings (FSR) of ‘A-‘ (Excellent) and issuer credit ratings (ICR) of “a-” of the four entities acquired from Unitrin, Inc. on June 2, 2008: Milwaukee Casualty Insurance Company (MCIC); (Brookfield, WI), Security National Insurance Company (SNIC) (Dallas, TX), Trinity Universal Insurance Company of Kansas, Inc. (TUIC) (Topeka, KS) and Trinity Lloyds Insurance Company (Trinity Lloyds) (Dallas, TX), all members of the New York-based AmTrust Group. “The positive outlook assigned to the members of AmTrust was extended following approval of intercompany reinsurance agreements with AmTrust International Insurance, Ltd. (AII) (Bermuda), a member of AmTrust,” said Best.

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