A.M. Best Upgrades XL Issuer Credit Rating
A.M. Best has upgraded the issuer credit rating [ICR] to “a+” from “a” and has affirmed the financial strength ratings [FSR] of A [Excellent] of the property/casualty subsidiaries of XL Group plc [XL] [Ireland].
The ratings agency said, “Concurrently, A.M. Best has upgraded the ICR to “bbb+”from “bbb” of XL and XLIT Ltd [Cayman Islands], as well as the debt ratings of XLIT Ltd. The outlook for all aforementioned ICRs has been revised to stable from positive, while the outlook for the FSRs remains stable [See below for a detailed listing of the companies and ratings].
“The ratings of XL reflect the organization’s excellent risk-adjusted capital, strong global profile in insurance and reinsurance, strong cycle management and favorable operating earnings trends. XL’s management has continued to enhance its underwriting capability within its global insurance operations to help deliver solid and stable earnings.
“To help execute this plan, XL has added high profile underwriting teams in recent years and continues to offer new products in an effort to provide solutions and remain relevant to its clients globally. At the same time that XL strives for strong earnings, the company continues to enhance its enterprise risk management framework in order to mitigate downside risk.
“Positive rating actions could occur if XL delivers consistent, long-term profitability driven by underwriting coupled with strong risk-adjusted capitalization. Negative rating actions could occur if the organization’s operating performance experiences unfavorable trends or if there are outsized losses relative to A.M. Best’s expectations, whether they are from catastrophes or investments that call enterprise risk management into question.
“A.M. Best has downgraded the FSR to B++ [Good] from A- [Excellent] and the ICR to “bbb+” from “a-” of XL Life Ltd. [XL Life] [Hamilton, Bermuda]. The outlook for both ratings is stable. These rating downgrades reflect XL Life’s limited business profile following the retrocession of XL’s UK and European life reinsurance business in May 2014. XL Life continues to retain the reserves related to U.S. term, income protect and other short-term products.
“This transaction allows XL to focus on its core property/casualty business and provides the company with additional financial flexibility. XL Life’s remaining business continues to be in run-off. XL Life’s ratings also reflect its more than adequate risk-adjusted capitalization position relative to its investment and insurance risks.
A.M. Best believes that given XL Life’s current profile, positive rating movement is unlikely. Negative rating actions could occur if XL Life’s capitalization and operating performance fall markedly short of A.M. Best’s expectations.”
