AM Best


A.M. Best Affirms Ratings of Polskie Towarzystwo Reasekuracji S.A.


CONTACTS:


Nicola Gaisford
Financial Analyst
+(44) 20 7397 0306
nicola.gaisford@ambest.com

Deniese Imoukhuede
Associate Director
+(44) 20 7397 0277
deniese.imoukhuede@ambest.com


Christopher Sharkey
Manager, Public Relations
+(1) 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

LONDON - JULY 18, 2014 11:10 AM (EDT)
A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Polskie Towarzystwo Reasekuracji S.A. (Polish Re) (Poland). The outlook for both ratings is stable.

The ratings of Polish Re reflect the explicit support provided by its ultimate parent, Fairfax Financial Holdings Limited (Fairfax) (Ontario, Canada), in the form of a legal binding guarantee with an indefinite term. Negative rating factors are Polish Re's marginal risk-adjusted capitalisation, track record of weak underwriting performance and uncertain business profile.

In addition to the explicit parental guarantee, Fairfax continues to provide technical support and other forms of assistance to Polish Re, which includes reinsurance protection and investment management services. Fairfax has further demonstrated its commitment to Polish Re, through the capital contribution of PLN 25 million (approximately USD 8 million) made in 2013.

Polish Re's marginal risk-adjusted capitalisation reflects the ongoing impact of unfavourable reserve development, largely on its motor third-party liability portfolio. However, the company's capital adequacy, as measured by A.M. Best, is expected to strengthen in 2014, due to actions taken by management to restore underwriting profitability, which includes the suspension of its motor account (representing 47% of gross written premium in 2013). A.M. Best considers the adequacy of Polish Re's risk-adjusted capitalisation in the near term will be reliant upon a material improvement in its technical performance.

Polish Re produced a combined ratio of 112% in 2013, continuing the trend of technical losses reported since 2010. Technical results were affected by further adverse prior year loss development on its motor portfolio. However, A.M. Best expects Polish Re to report a technical profit as at half-year 2014, following the non-renewal of poor performing risks. Going forward, A.M. Best believes that Polish Re faces challenges in expanding its portfolio profitably, owing to the highly competitive nature of its target markets.

Positive rating actions are unlikely in the near term. Negative rating actions could occur if there is further deterioration in Polish Re's underwriting performance or erosion of its risk-adjusted capitalisation to a level considered unsupportive of the company's current rating level. Additionally, a reduction in the level of support from Fairfax would result in negative actions being taken.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures:A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

This rating announcement has been issued by A.M. Best Europe - Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.


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