Best’s News & Research Service - October 03, 2014 10:04 AM (EDT)
A.M. Best Affirms Ratings of Atradius N.V.'s Main Operating Subsidiaries
- October 03, 2014 10:04 AM (EDT)
London //BestWire// - A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit ratings of "a" of the main operating subsidiaries of Atradius N.V. (Atradius) (Netherlands): Atradius Credit Insurance N.V. (ACI) (Netherlands), Compania Espanola de Seguros y Reaseguros de Credito y Caucion S.A. (CyC) (Spain), Atradius Reinsurance Limited (ARe) (Ireland) and Atradius Trade Credit Insurance, Inc (ATCI) (US). The outlook for all ratings is stable.
The ratings of Atradius' main operating entities reflect their strategic importance to the Atradius group through their presence in key markets around the world. Additionally, ACI remains the main revenue and earnings contributor to Atradius, while ARe remains of strategic importance to the group as its licensed reinsurer of third-party and intra-group business.
The rating affirmations also consider Atradius' excellent consolidated risk-adjusted capitalisation, strong, albeit volatile, technical performance and excellent competitive position within the global trade credit insurance market. A partly offsetting factor is the potential downside associated with the performance of the Spanish and Portuguese account, as Atradius seeks to recover premium volumes.
Atradius' consolidated risk-adjusted capitalisation is expected to be maintained at an excellent level, supported by the group's strong earnings generation and cautious approach to growth, in response to the recent upturn in trade conditions within its core European markets. Adequate levels of risk-adjusted capitalisation are also maintained for each of the rated subsidiaries.
The effect of management actions taken to sustain Atradius' strong technical results continue to materialise. In particular, Atradius reported further improvements in the performance of its Spanish and Portuguese account, with a net combined ratio of 66.0% for the first half of 2014, compared with 87.5% for the same period of 2013. The improvement in the performance of this business since 2012 has been realised against the backdrop of a contracting portfolio, resulting from the group's risk management initiatives. Due to the slow economic recovery in the Iberian region, some uncertainty remains as to the sustainability of Atradius' strong technical performance, as the group initiates its expansion plans in this region. Nonetheless, A.M. Best believes that Atradius has implemented measures that will continue to support overall positive operating results.
The ratings of ACI, CyC, ARe and ATCI continue to reflect the opinion that the rating fundamentals of Grupo Catalana Occidente S.A. (GCO) (Spain), the majority shareholder of Atradius, do not constrain the financial strength of the Atradius group of companies. GCO is the non-operating holding company of a leading insurance group in the local Spanish market.
Positive rating actions could occur if Atradius continues to produce strong technical results across its portfolio whilst maintaining excellent consolidated risk-adjusted capitalisation.
Negative rating actions could occur if risk-adjusted capitalisation at the consolidated and stand-alone entity levels were considered to be unsupportive of the current rating levels. A sustained decline in operating performance, particularly in relation to Atradius' Spanish and Portuguese portfolio, could also result in negative ratings pressure. Furthermore, a change in A.M. Best's perception regarding the ability of the Atradius group to deploy capital across its companies would likely result in negative rating actions.
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.
Key insurance criteria reports utilised:
o Analyzing Insurance Holding Company Liquidity
o Catastrophe Analysis in A.M. Best Ratings
o Equity Credit for Hybrid Securities
o Evaluating Country Risk
o Insurance Holding Company and Debt Ratings
o Rating Members of Insurance Groups
o Risk Management and the Rating Process for Insurance Companies
o Understanding BCAR for Property/Casualty Insurers
o Understanding Universal BCAR - A.M. Best's Capital Adequacy Ratio for Insurers
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.