A.M. Best Revises Outlook to Positive for Issuer Credit and Debt Ratings of Transatlantic Holdings, Inc. and Its Subsidiaries
February 27 2012 - 2:34PM
Business Wire
A.M. Best Co. has revised the outlook to positive from
stable and affirmed the issuer credit ratings (ICR) of “a” of
Transatlantic Reinsurance Company (Transatlantic), Fair
American Insurance and Reinsurance Company (both domiciled in
New York, NY) and Trans Re Zurich Reinsurance Company Ltd.
(Switzerland). A.M. Best also has affirmed the financial strength
ratings (FSR) of A (Excellent) of Transatlantic and its members.
The outlook for the FSRs is stable.
Concurrently, A.M. Best has revised the outlook to positive from
stable and affirmed the ICR of “bbb” and debt ratings of “bbb” on
$750 million 5.75% senior unsecured notes due 2015 and the $350
million 8% senior unsecured notes due 2039 of the parent holding
company; Transatlantic Holdings Inc. (New York, NY) (NYSE:
TRH).
The rating affirmations reflect Transatlantic’s strong
capitalization and excellent business profile. Although 2011
operating results were affected by the multiple worldwide
catastrophes resulting in a combined ratio of 113.9% for the year,
Transatlantic’s five-year average operating performance is still in
line with its peer group. As a casualty oriented writer,
Transatlantic has a history of consistent operating results
complemented by strong investment income.
Transatlantic maintains a formalized risk management framework
that recognizes risk categories and allocates ownership of each
category. Furthermore, the company maintains an economic capital
model, which is used to analyze various risk scenarios and as a
guide for developing business mix.
The positive outlook on Transatlantic’s ICRs reflects A M Best’s
acknowledgement of the company’s improved risk-based capitalization
and expectation that current risk-based capitalization levels will
be sustained.
Transatlantic’s debt-to-capital ratio is expected to remain in
the high teens as capital is anticipated to be enhanced by strong
earnings. Fixed charge coverage is expected to rebound in 2012 and
register in the seven to eight times range.
Partially offsetting these positive attributes are A.M. Best’s
concerns regarding the current soft pricing conditions in the
casualty market from which Transatlantic derives a substantial
portion of its premiums as well as the reserve adequacy of pre 2001
casualty oriented business. A.M. Best’s concern regarding pre 2001
reserve adequacy is mitigated by the declining percentage of these
reserves relative to the company’s total reserves.
Positive rating actions could occur if Transatlantic’s long-term
profitability results in consistently strong risk-adjusted capital
levels. Negative rating actions could occur if Transatlantic
experiences outsized catastrophe or investment losses relative to
its peer group or if capital erosion due to operating performance
exceeds A.M. Best’s expectations.
The methodology used in determining these ratings is Best’s
Credit Rating Methodology, which provides a comprehensive
explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Key
criteria utilized include: “Understanding BCAR for
Property/Casualty Insurers”; “Rating Members of Insurance Groups”;
“Catastrophe Analysis in A.M. Best Ratings”; “Risk Management and
the Rating Process for Insurance Companies”; “Understanding
Universal BCAR”; and “A.M. Best’s Ratings & the Treatment of
Debt.” Best’s Credit Rating Methodology can be found at
www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and
most authoritative insurance rating and information source. For
more information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc.
ALL RIGHTS RESERVED.
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