Ratings Recap: Hyundai, Jupiter, Exchange, West England Club

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit rating of “a-” of South Korea’s Hyundai Marine & Fire Insurance Co., Ltd. (HMFI) with stable outlooks. Best said: “The ratings reflect the company’s improved capitalization, profitability and consistent investment performance.” Best also noted that “HMFI achieved a net income of KRW 171 billion (USD 169 million) in fiscal year 2007, which is an increase of 300 percent compared to the previous year. This was due to a lower loss ratio in the motor insurance portfolio and lack of catastrophic events in fiscal year 2007. The decline in the funding cost for the maturity refund savings reserve was also a contributing factor to the improvement in net income. On the revenue side, net premiums written showed strong growth, with an increase of 21 percent compared to the prior year. The overall combined ratio in fiscal year 2007 was 101 percent compared to 105 percent in fiscal year 2006.

Standard & Poor’s Ratings Services has affirmed the ‘AA’ long-term counterparty credit and financial strength ratings on Guernsey-based Jupiter Insurance Ltd. with a stable outlook. S&P said: “The ratings are based on Jupiter’s status as the wholly owned captive insurer of U.K.-based oil major BP PLC (BP; AA/Stable/A-1+). Jupiter qualifies as a captive insurer under Standard & Poor’s captive methodology and as such is rated at a level commensurate with its parent. As BP’s sole active captive insurer, Jupiter forms an integral part of BP’s risk management strategy. Jupiter insures only BP risks, or a share up to a maximum of BP’s equity share for joint ventures. Although managed by an external party, BP maintains considerable representation within Jupiter, with BP’s insurance management represented on both the underwriting and finance committees. Jupiter relies completely on BP for the preservation of its competitive position and financial flexibility. The stable outlook on Jupiter reflects the stable outlook on BP. The ratings and outlook on Jupiter will be determined by those of the parent for as long as Jupiter continues to qualify as a captive insurer under Standard & Poor’s rating criteria.”

A.M. Best Co. has placed the financial strength rating of ‘B++’ (Good) and issuer credit rating of “bbb+” of the UK’s Exchange Insurance Company Limited under review with negative implications. Best indicated that it had taken the action in order to “assess the implications of the recent decline in the UK property market on the trading prospects and risk-adjusted capitalization of Exchange. This action follows the acceptance in principle by the board of directors of an offer by an external investor to purchase a 50 percent stake in the company.” Best said that if this sale fails to take place it “anticipates that a significant downgrade of Exchange’s ratings would follow. Resolution of the under review status of the rating is expected for early 2009.”

A.M. Best Co. has placed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of Luxembourg-based West of England Ship Owners Mutual Insurance Association (WOE or the Club) under review with negative implications. Best’s actions follow what it describes as a “weakening of the Club’s risk-adjusted capitalization as a result of substantial investment losses and poor anticipated underwriting performance. Best also noted that although “the Club benefits from a $53.3 million outstanding additional call on the 2006 policy year,” the amount may not be “sufficient to offset these factors. Best noted that “WOE is likely to address its weakened risk-adjusted capitalization,” and the under review status gives Best time to assess “the impact of the Club’s actions. The review is likely to be completed by early December 2008. Failure of the Club to take any action could lead to a rating downgrade.”