A.M. Best Affirms Ariel’s Ratings
A.M. Best Co. yesterday [Mar.1] affirmed the financial strength rating of A- [Excellent] and issuer credit rating [ICR] of “a-” of Bermuda’s Ariel Reinsurance Company Ltd. Additionally, A.M. Best has affirmed the ICR of “bbb-” of the parent company, Bermuda-domiciled Ariel Holdings, Ltd. The outlook for all ratings is stable.
The ratings of Ariel Re reflect its strong level of risk-adjusted capitalization, favorable operating performance and solid enterprise risk management capabilities.
These strengths are partially offset by Ariel Re’s limited business profile following the company’s recent announcement that it has entered into a definitive agreement with the Goldman Sachs Group, Inc. for the eventual sale of its Bermuda-based property, marine and aviation businesses.
A Best analyst said: “As a result of this transaction, Ariel Re will be a much smaller entity with a significantly reduced risk profile. Ariel Re will continue to assume the business underwritten by its Lloyds affiliate, Atrium Underwriting Group Limited, under an existing quota share arrangement that will remain in force.
“This business has historically proven to be very profitable for Ariel Re and it will in effect be managed by the successful management team at Atrium Underwriting Group Limited, subsequent to the closing of the transaction, which is expected during the second quarter of 2012. It also is planned that Ariel Re will be renamed Arden Re as the Ariel brand name will be sold to Goldman as part of the announced transaction.”
The ratings agency said the risk-adjusted capitalization, subsequent to the close of the transaction, also is expected to remain supportive of the current ratings and considers the counter party credit exposure that will result from a loss portfolio transfer of underwriting liabilities to Goldman’s Lloyds syndicate.
This credit exposure also is somewhat mitigated by collateral that will be held through the run off of these obligations.
The outlook reflects A.M. Best’s expectation that the overall operating results will remain positive and the risk-adjusted capital levels will continue to be supportive of the current ratings. A.M. Best will continue to monitor this transaction through to its closing. Should there be any material departure from the Arden Re business plan that was shared with A.M. Best, which is not anticipated, the current ratings will be re-evaluated.
Rating factors that could lead to Ariel Re’s ratings being upgraded would be the continuation of a long-term, consistently strong operating profitability and the maintaining of excellent risk-adjusted capital levels. The rating factors that could lead to a negative outlook or rating downgrades include unfavorable operating profitability trends, outsized investment losses and a significant decline in the company’s risk-adjusted capital that would not be supportive of the current rating level.
