S&P Upgrades Crum & Forster Ratings to ‘A-‘; Fairfax ‘BBB-‘ Rating Affirmed

November 23, 2009

Standard & Poor’s Ratings Services has raised its counterparty credit and financial strength ratings on Crum & Forster Insurance Co. and related entities to ‘A-‘ from ‘BBB+’. S&P also affirmed its ‘BBB-‘ counterparty credit rating on Fairfax Financial Holdings Ltd. (FFH) and its ‘A-‘ counterparty credit and financial strength ratings on FFH’s other core subsidiaries, as well as the entities of the group that are in runoff.

S&P said the “outlook on all of the companies is stable, reflecting our expectation for their financial profile to remain strong.”

“Our affirmation of the ratings on most of the Toronto-based FFH organization reflects its strong financial profile, including strong capital and liquidity,” explained credit analyst Michael Gross. “But, this is tempered by an above-average tolerance for market risk as well as lackluster underwriting performance amid tough property/casualty industry conditions.”

FFH, with $7.65 billion in shareholders’ equity as of Sept. 30, 2009, is the parent organization of a number of insurance subsidiaries, including U.S.-based Odyssey Re, Canada-based Northbridge Financial, and U.S.-based Crum & Forster. “The company’s strong and diversified insurance business profile is complemented by historically above-average investment performance attributable to the leadership of affiliate investment manager Hamblin Watsa,” S&P added.

The rating agency explained that the upgrade of the Crum & Forster insurance units “reflects our revised opinion of the long-term importance of Crum & Forster to the Fairfax group of companies, as well as the benefits it provides to the Fairfax group. With $1.6 billion in statutory surplus as of Sept. 30, 2009, Crum & Forster has evolved into a specialty writer that is well positioned for growth in standard commercial lines once market conditions improve.

“Crum & Forster has been, and is expected to remain, a meaningful provider of dividends to FFH. Also, FFH is able to leverage its core competency–investment management–in conjunction with the Crum & Forster balance sheet.”

Source: Standard & Poor’s – www.standardandpoors.com

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