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FOR IMMEDIATE RELEASE
LONDON - AUGUST 13, 2014 10:27 AM (EDT)
A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of "a" of Eni Insurance Limited (EIL) (Dublin). The outlook for both ratings remains stable.
EIL is the sole captive of Eni S.p.A. (Eni) (Italy), an Italian multinational gas and oil company with operations in more than 80 countries.
The ratings of EIL reflect the company's consistently strong, albeit relatively volatile, operating performance and strong risk-adjusted capitalisation, as well as its importance to Eni Group as a risk management tool. These positive rating factors are partially offset by EIL's exposure to peripheral European sovereign bonds. In addition, EIL has exposure to potentially substantial underwriting losses, due to its large maximum line size. However, large losses will be moderated by comprehensive reinsurance, which is placed with a strong panel of reinsurers.
EIL's risk-adjusted capitalisation is likely to remain strong in 2014. Available capital and surplus is expected to improve further in 2014 due to a non-recurring return premium payment of EUR 30 million to EIL from a reinsurance company, as well as good financial performance, subject to large loss experience in the remainder of the year. In addition, a further reduction in credit risk is anticipated.
In 2014, pre-tax profits are expected to be comparable to the EUR 70 million reported in 2013, subject to the absence of major loss events for the remainder of the year. The strong result in 2013 was underpinned by benign claims experience in the company's main book of fire/property business. EIL produced a combined ratio of 45.6% in 2013, despite adverse reserve development in its general liability line relating to a large claim in the 2011 accident year. The expense ratio improved due to the full amortisation of acquisition costs relating to a transferred run-off portfolio.
Prospective performance is likely to remain volatile, due to potential large losses from EIL's property account and unrealised gains/losses from its peripheral European sovereign bond portfolio. Technical earnings volatility is partly moderated by comprehensive reinsurance with a strong panel of reinsurers. EIL increased its retention on its main reinsurance programme covering fire and property risks to USD 100 million per event in 2014, from USD 50 million. In spite of this, A.M. Best believes that the programme continues to provide sound protection to EIL's balance sheet. EIL's large maximum line size means that it is dependent on the continued support of its reinsurers.
A.M. Best believes that EIL is well positioned at its current rating level. Negative rating actions would arise from a significant deterioration in risk-adjusted capitalisation or a prolonged weakening in the company's underwriting performance. In addition, if the captive's importance as a risk management tool within the Eni Group were to decline, negative rating pressure could arise.
A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best's Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.
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.