Ratings Recap: Malaysian Re, Asia Capital Re, AGS (Diageo), NEMI

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit rating of “a-” of Malaysian Reinsurance Berhad (Malaysian Re), both with stable outlooks. “The ratings reflect Malaysian Re’s stable and excellent underwriting performance, conservative investment portfolio and strong market presence in Malaysia,” said Best. “The ratings also recognize the group synergy that the company enjoys as a member of MNRB Holdings Berhad (MNRB Group).” Best also noted that “Malaysian Re has outsourced its administrative activities to its parent company, MNRB Group. MNRB Group formed a Group Shared Services Unit (GSSU) to centralize the common activities from its subsidiaries,” which, Best indicated, “enables Malaysian Re to achieve a more cost effective structure.”

Standard & Poor’s Ratings Services has assigned its ‘A-‘ long-term insurer financial strength rating and counterparty credit ratings to Singapore-based Asia Capital Reinsurance Group Pte Ltd. (ACR) with a stable outlook. “The ratings on ACR reflect the company’s strong capital position and financial flexibility, which will support its growth plans over the medium term (i.e. the next two to three years), explained credit analyst Paul Clarkson. “The ratings also reflect ACR’s strong technical ability, sustainable business profile, and adequate investment profile. These factors are, however, offset by the company’s unseasoned and currently volatile underwriting performance, reflecting its start-up stage, and reinsurance strategy with a high retention level.” S&P also noted that “ACR’s capitalization is strong, based on our risk-based capital analysis, and should withstand reasonable underwriting, reserving or investment risk over the medium term and support its continued growth plans. The company’s ratio of shareholders’ funds to net premium income stood at 270 percent at the end of March 2008. ACR’s financial flexibility is satisfactory, reflecting its shareholders’ commitment over the medium term and a sufficient capital buffer to fund growth. We do not expect the wider group’s expansion into the Middle East and Malaysian markets to be a capital drain on ACR.”

Standard & Poor’s Ratings Services Has affirmed its ‘A-‘ long-term counterparty credit and financial strength ratings on Guernsey-based A.G.S. Insurance Co. Ltd. (AGS) with a stable outlook. “The ratings are based on AGS’s status as the wholly owned captive subsidiary of the U.K.-based drinks manufacturer Diageo PLC (Diageo; A-/Stable/A-2),” said S&P, adding that the Company qualifies as a captive insurer under S&P’s rating criteria. As such it is “rated at a level commensurate with the ratings on its parent,” S&P noted. “AGS is regarded as an integral part of Diageo’s risk management strategy. It is the only captive insurer of the Diageo group, and solely writes business emanating from the group. Diageo has maintained a captive strategy since 1983 to minimize the group’s risk-transfer costs, and to increase emphasis on risk management and loss prevention within the group. In turn, AGS remains wholly reliant on Diageo for the preservation of its competitive position and financial flexibility. Hence, AGS’s fortunes are inextricably linked to those of Diageo.”

Standard & Poor’s Ratings Services has revised its CreditWatch implications on Norway-based non-life insurer NEMI Forsikring ASA (NEMI) to positive from negative. The ‘BB’ insurer financial strength and long-term counterparty credit ratings, however, do remain on CreditWatch. S&P said the “revised CreditWatch status follows the announcement by Connecticut-based insurer W.R. Berkley Corp. (WRB)”, (rated; BBB+/Stable/–) that it has signed a letter of intent to acquire 100 percent of NEMI from Iceland-based insurer Tryggingamidstodin hf. (TM; BB/Watch Neg/–). WRB’s core insurance operating companies are rated ‘A+’ with a stable outlook.” S&P said the “proposed transaction, which is subject to the completion of final due diligence, a definitive purchase agreement, and regulatory approvals, is expected to be completed in early 2009.” Credit analyst Peter McClean added: “The ratings continue to reflect NEMI’s current marginal financial flexibility, offset by good, although weakened, capitalization and operating performance.” He also indicated that S&P “expects to resolve the CreditWatch status upon satisfactory completion of the transaction, at which time it expects to raise the ratings by at least two notches, subject to clarification of the new owners’ intentions.”