AM Best Upgrades Somerset Re ICR Ratings

January 26, 2018 | 0 Comments

A.M. Best has upgraded the Long-Term Issuer Credit Rating [Long-Term ICR] to “bbb+” from “bbb” and affirmed the Financial Strength Rating [FSR] of B++ [Good] of Somerset Reinsurance, and the outlook of these Credit Ratings is stable.

A statement from the ratings agency said, “The ratings reflect Somerset Re’s balance sheet strength, which A.M. Best categorizes as very strong, its operating performance, which due to the newness of the company is marginal, its neutral business profile and appropriate enterprise risk management.

“Somerset Re is a life and annuity reinsurer registered in Bermuda. The company is focused on providing underwriting and reinsurance solutions to the life insurance marketplace while also offering reinsurance capacity to companies in need of reinsurance solutions for in-force asset intensive business. Somerset Re also provides additional counterparty risk alternatives.

“The upgrade of the company’s Long-Term ICR reflects its very strong level of risk-based capitalization measured in both absolute terms as well as A.M. Best’s capital model. As a newly formed company, the current capitalization level is anticipated to support new business growth over the intermediate term without the need to access additional funding. Early profitability is noted as part of Somerset Re’s operating profile with recent financial metrics in line with its submitted business plan.

“Conversely, Somerset Re’s very strong capital profile is based on the limited amount of business generated by the company to date, as it is still in the early stages of executing its business plan. The lack of a trend in the previously noted profit from operations will be a limitation to the ratings level for the company until a meaningful trend can be established over the near to intermediate term. A.M. Best will continue to monitor the execution of Somerset Re’s business plan to assess the business profile and financial metrics as trends develop, noting that actual results are in-line with management’s submitted business plan, which forecasts growth and profitable operations moving forward.

“Positive rating action could occur if the company is able to demonstrate a track record of profitable operations along with a capital and business profile in line with the submitted business plan. Conversely, negative rating action could occur if the capital structure of the company declines due to adverse impacts from execution of the company’s business plan.”

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