S&P Affirms Alliance Re ‘BBB’ Ratings

Standard & Poor’s Ratings Services announced that it has affirmed its “BBB” long-term counterparty credit and insurer financial strength ratings on Cyprus-based reinsurer Alliance International Reinsurance Co. Ltd. All of the ratings have also been removed from CreditWatch, where they were placed on Oct. 21, 2004, and have been assigned a stable outlook.

S&P had placed the ratings on CreditWatch following a takeover approach, as did A.M. Best (See IJ Website Oct.19). However S&P credit analyst Kevin Willis noted: “Today’s rating actions follow the termination of discussions between Alliance Re management and the potential acquirer. Alliance Re will continue as an independent, publicly quoted Cypriot company.”

“The ratings on Alliance Re reflect its strong capitalization and experienced management team,” S&P’s announcement continued. “These positive factors are offset by the company’s marginal competitive position and lack of significant operating track record.”

S&P said the stable outlook reflects its “expectation that Alliance Re will continue as a publicly quoted Cypriot company, but will seek to develop and take advantage of strategic relationships in the international (re)insurance market to enhance its competitive position.

“Capitalization will remain strong, driven principally by capital adequacy, which will remain very strong as business expands. Alliance Re is expected to continue to underwrite conservatively with a diverse portfolio, but will largely exclude North America and Western Europe, and concentrate on short-tail property and marine risks, avoiding liability exposures.”

The rating agency also indicated that it expects the company “will continue to develop its Middle East and African markets expertise. Operating performance is expected to improve in 2004, with the combined ratio remaining below 100 percent. If premium rates deteriorate to uneconomic levels, Alliance Re is expected to withdraw from unprofitable lines to maintain positive earnings. Bank counterparties will be transitioned to securely rated banks.”