Best Removes Glacier Re Ratings From Review; Assigns Negative Outlook

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit rating of “a-” of Swiss-based Glacier Reinsurance AG (Glacier Re) (Switzerland), and has removed the ratings from under review with negative implications and assigned a negative outlook.

Best made the announcement following the completion of the sale of Glacier Re’s subsidiary, Glacier Insurance AG, to Torus Insurance (Bermuda) Limited. [See IJ web site – https://www.insurancejournal.com/news/international/2010/07/01/111218.htm .]

Best said is affirmation of Glacier Re’s ratings “takes into account the group’s latest strategic business plan, which reflects the sale of Glacier Insurance.

“The negative outlook reflects the execution risk associated with implementation of Glacier Re’s revised strategy, which entails continued development of small to medium-sized reinsurance business in Europe and simultaneous reduction in the company’s historical emphasis on U.S. and Japanese catastrophe business.”

Best added that it “continues to believe that Glacier Re’s financial flexibility is restricted. The leading shareholders in the group’s ultimate parent, Glacier Re Holdings S.a.r.l., are HBK Master Fund L.P. and Quantum Partners LDC.

“Glacier Re is expected to maintain excellent risk-adjusted capitalization during 2010, supported by a significant reduction in net premiums written as a result of the sale of Glacier Insurance, reduced exposure to peak perils in certain regions and the company’s highly conservative investment portfolio. Capital in 2010 will benefit from the proceeds from the subsidiary sale, albeit largely offset by an expected underwriting loss.”
Best also indicated that its analysis factored in “a share buyback of $100 million this year. The company’s planned overall reduction in exposure in 2010 is also likely to be offset to some extent by a further increase in its net retention ratio.”

As a result of losses incurred from the Chile earthquake, the company is expected to report a technical loss in 2010, compared to the excellent profit of $51 million achieved in 2009. The 2009 result benefited from favorable rating conditions for Glacier Re’s main lines of business and benign catastrophe experience. Overall earnings in 2010 are still expected to be positive despite the technical loss due to net investment income and the proceeds from the sale of Glacier Insurance.

Best also observed that Glacier Re’s “revised business strategy is the company’s second significant change of direction in less than a year. Whilst Glacier Re is developing its profile for small to medium-sized reinsurance business in Europe, A.M. Best believes that significant progress may be difficult, particularly as a retrenchment strategy is implemented at the same time for other areas of the account.”

Source: A.M. Best