A.M. Best Affirms Sirius International Ratings
A.M. Best has affirmed the ICR of “bbb” and the debt ratings of “bbb” on USD 400 million 6.375% senior unsecured notes, due in 2017 and “bb+” on USD 250 million non-cumulative perpetual preference shares of Sirius International Group, Ltd (Hamilton, Bermuda). The outlook for all ratings remains stable.
A statement from the ratings agency said: “Risk-adjusted capitalisation for Sirius is expected to remain strong, supported by an increase in retained earnings, which are expected to benefit from the benign catastrophe activity experienced in 2012 to date.
“Sirius’ claims paying ability continues to be enhanced by a safety reserve, which in accordance with Swedish insurance regulations, can normally only be released to cover insurance losses and is funded from the company’s cumulative retained pre-tax earnings. Sirius’ safety reserve at year-end 2011 amounted to SEK 9.6 billion.
“In 2011, Sirius’ consolidated pre-tax profit fell to SEK 0.4 billion (2010: SEK 1.1 billion). Technical performance was severely impacted by a number of large catastrophes during 2011 including the Japanese earthquake and tsunami event, as well as the New Zealand earthquake, for which loss estimates as at second-quarter 2012 were USD 72 million and USD 46 million, respectively.
“The major catastrophe losses contributed approximately 20 percentage points to the overall loss ratio. Mainly as a result of this, Sirius’ combined ratio increased above its five-year average of 90.2% to just above 100.0%. Following benign catastrophe experience during the first half of 2012, A.M. Best expects a strong return to underwriting profitability by year end, supported by stable investment returns.
“Sirius maintains a good business profile in the reinsurance market, writing business through an international network of branch offices. In 2011, Sirius’ gross written premiums decreased by around 20%, as a result of the restructuring and the commutation of quota share treaties with Esurance Insurance Company (a former subsidiary of Sirius’ ultimate parent, White Mountains Insurance Group, Ltd.) which was sold to Allstate Corporation. Sirius continues to focus on shorter-tail lines, with property reinsurance currently generating approximately half of net written premiums.”
