10 Insurers See Ratings Updates
Insurance Networking Ratings Corner, January 8, 2013
Endurance Specialty Insurance Ltd.
Fitch has affirmed the ratings of Endurance Specialty Holdings Ltd. (ENH) and its reinsurance operating subsidiaries, including the Issuer Default Rating (IDR) for ENH at 'A-', and the Insurer Financial Strength (IFS) rating of Endurance Specialty Insurance Ltd. at 'A'. The Rating Outlook is Stable.
Fitch's rationale for the affirmation of ENH's ratings reflects the company's favorable earnings and interest coverage, moderate financial leverage, and high-quality and liquid investment portfolio. The ratings also reflect the inherent earnings volatility derived from the company's catastrophe exposure, potential uncertainty in the company's loss reserve estimates for long-tail business lines, and anticipated challenges in the overall competitive – but generally improving – property/casualty market rate environment.
ENH announced an initial net loss estimate from Hurricane Sandy of $160 million pre-tax, with about $125 million from the company's reinsurance segment and the remainder from the insurance segment. Fitch considers this level to be manageable, given the company's strong capitalization (net loss represents about 6 percent of shareholders' equity at Sept. 30, 2012), although the loss estimate is still subject to significant uncertainty.
A.M. Best has placed under review with positive implications the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of First Nonprofit Insurance Co. (FNIC).
The under-review status follows the announcement that FNIC has entered into a definitive agreement, under which it will become part of the AmTrust Financial Services Inc. group. As part of the transaction, FNIC's parent, Mutual Insurers Holding Co., will be demutualized and converted into a stock holding company, which will continue to own FNIC. The positive implications reflect the expected benefits to be derived by being part of a much larger organization with access to additional financial and managerial resources.
The transaction is expected to close during the first half of 2013 and is subject to regulatory and policyholder approval.
Fubon Financial Holding Co. Ltd.
Moody's has affirmed the Baa1 issuer rating of Fubon Financial Holding Co. Ltd. (Fubon Financial) with a stable outlook. At the same time, Moody's has affirmed the A2 deposit and C- bank financial strength ratings (baseline credit assessment of baa2) of Taipei Fubon Commercial Bank Co. Ltd. (Taipei Fubon Bank) with a stable outlook.
This follows Fubon Financial and Taipei Fubon Bank's announcement of the proposed acquisition of First Sino Bank. Specifically, Taipei Fubon Bank will acquire 51 percent and Fubon Financial will acquire the other 29 percent.
Total consideration of the transaction is RMB6.45 billion (TWD30.6 billion), which includes a capital injection of RMB0.8 billion to First Sino Bank. In addition to internal cash resources, Fubon Financial will issue new shares of TWD20 to TWD25 billion to pay for the transaction, of which about TWD10 to TWD15 billion will be injected into Taipei Fubon Bank. The transaction is subject to regulatory approvals of Taiwan's Financial Supervisory Commission, Investment Commission of the Ministry of Economic Affairs and the China Banking Regulatory Commission. It is expected to close in Q2 2013.
Hannover Life Reassurance Ltd.
A.M. Best Europe has withdrawn the financial strength rating of A+ (Superior) and issuer credit rating of “aa-” of Hannover Life Reassurance (U.K.) Ltd. (Hannover Life UK), following its conversion into a branch of its parent company, Hannover Rueckversicherung AG. The rationale for the conversion is to improve Hannover Life U.K.’s capital efficiency and to enhance its service offering to clients.
Lakeside Re III Ltd.
S&P assigned its 'B+(sf)' rating to the $270 million, variable rate principal at risk notes, due 2016, issued by Lakeside Re III Ltd. The notes cover losses in the Canadian provinces of Alberta, British Columbia, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, and Quebec, as well as the U.S. states of Arkansas, California, Illinois, Indiana, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Ohio, Oregon, Tennessee, Washington, and Wisconsin, from earthquake and ensuing damage caused by related earth shake, fire, sprinkler leakage, volcanic disturbance or eruption, tsunami, and flooding due to dam or levee ruptures on an annual aggregate basis.
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