A.M. Best Removes Torus Ratings From Review

Rating company A.M. Best has removed from under review with negative implications and affirmed the financial strength rating [FSR] of A- [Excellent] and issuer credit ratings [ICR] of “a-” of Torus Insurance [Bermuda] Limited [Torus Bermuda] [Bermuda], Torus Insurance [UK] Limited [Torus UK] [United Kingdom] and Torus Insurance [Europe] AG [Torus Europe] [Liechtenstein].

Concurrently, A.M. Best has removed from under review with negative implications and affirmed the ICR of “bbb-” of Torus Insurance Holdings Limited [Torus Holdings] [Bermuda], the previous ultimate parent company of the Torus group [Torus]. The ratings have been assigned a negative outlook. Subsequently, A.M. Best has withdrawn the rating of Torus Holdings as it is now an intermediate non-operating holding company within a larger group.

A statement from the ratings agency said, “In addition, A.M. Best Co. has removed from under review and affirmed the FSR of A- [Excellent] and ICR of “a-” of Torus Specialty Insurance Company [Torus Specialty] and Torus National Insurance Company [Torus National] [both domiciled in Wilmington, Delaware, USA]. The ratings have been assigned a negative outlook.

“The rating actions follow the completion of the acquisition of Torus Holdings by Enstar Group Limited [Enstar] and Stone Point Capital LLC [Stone Point] on 1 April 2014 and A.M. Best’s review of the new owners’ plans for the Torus group.

“Torus’ consolidated historical financial performance has been weak with overall losses made each year since 2010. Management, supported by the group’s new owners, is committed to improving financial performance and has taken actions to achieve significant expense savings and exit underperforming lines of business. Torus’ preference shares, which carried high interest payments, have also been redeemed, thereby removing a strain on future retained earnings. Despite these actions, A.M. Best believes that achieving sustainable profitable results will be challenging, given the strong competition in Torus’ main business lines.

“Positive rating factors partly offsetting the above-referenced challenges and supporting the rating affirmations include the support of Enstar and Stone Point. The group’s new owners are expected to provide strategic and operational support to Torus, as well as financial assistance if needed. Both have a proven track record of building strong and profitable insurance businesses, Enstar in insurance run-off and Stone Point in active underwriting.

“Torus also benefits from strong risk-adjusted capitalisation, both on a consolidated basis and for each rated operating company. Torus Bermuda operates as the recipient of the majority of the group’s underwriting risk through a 65% quota share treaty and aggregate stop loss contract with Torus UK, Torus National and Torus Specialty. Torus Bermuda also provides reinsurance support to Torus Europe through a 95% quota share arrangement and to Torus’ Lloyd’s corporate members through 85% quota share treaties.

“The new owners are committed to maintaining risk-adjusted capitalisation at a level which is supportive of the ratings of the Torus insurance subsidiaries. In 2014, risk-adjusted capitalisation has been strengthened by a loss portfolio transfer reinsurance agreement covering Torus’ discontinued lines reserves put in place between Torus Bermuda and a cell of Fitzwilliam Insurance Limited [Fitzwilliam], a subsidiary of Enstar domiciled in Bermuda.

“In addition, Torus has, since its launch in 2008, built up a significant market presence through a combination of acquisitions of teams and businesses and organic growth. As a result, Torus now writes a well-diversified specialist portfolio from operations in London, Bermuda, the United States and continental Europe.

“Positive rating actions could follow if management delivers on its plan to improve financial performance for the Torus group of companies. Negative rating actions could follow if Torus continues to underperform against its own plans and A.M. Best’s expectations.”

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