Ratings Roundup: Atradius, Catalana, China Group

Standard & Poor’s Ratings Services has lowered its long-term counterparty credit and insurer financial strength ratings on Atradius Credit Insurance N.V., Atradius Reinsurance Ltd., Atradius Trade Credit Insurance Inc., and Compañía Española de Seguros y Reaseguros de Crédito y Caución S.A. (CyC)–the core operating entities of the Netherlands-based Atradius credit insurance group–to ‘A-‘ from ‘A’. S&P also lowered its short-term counterparty ratings on Atradius Credit Insurance N.V. to ‘A-2’ from ‘A-1′ and has placed the ratings on CreditWatch with negative implications. “The rating actions reflect our view of the sharp deterioration in Atradius’ earnings in the final quarter of 2008, with a consequent weakening of capitalization at a time when financial flexibility is constrained,” said S&P. Credit analyst Charis Adu-Kwapong added: “We expect to resolve the CreditWatch placement within the next two months, following further discussions with the management of Atradius and its parent company. We expect that the potential downside risk to the ratings will likely be limited to one notch.”

Standard & Poor’s Ratings Services has placed its ‘A-‘ long-term counterparty credit and insurer financial strength ratings on Seguros Catalana Occidente, S.A. de Seguros y Reaseguros (SCO) and Bilbao, Compañía Anonima de Seguros y Reaseguros, S.A. (Seguros Bilbao) on CreditWatch with negative implications. These entities form part of Spain-based insurance group Grupo Catalana Occidente, S.A. y Sociedades Dependientes (GCO). S&P said the “CreditWatch placement follows a related rating action on GCO’s credit insurance subsidiaries, Netherlands-based Atradius Credit Insurance N.V. (Atradius) and Spain-based Compañía Española de Seguros y Reaseguros de Crédito y Caución S.A. (CyC), both of which had their ratings lowered to ‘A-‘ with a CreditWatch negative placement today following unexpectedly weak operating performance and resulting weakening of capital adequacy.” S&P added that until now it has “rated Atradius higher than its parent based on its “segmented rating” methodology. Now that these ratings are equalized, they are expected to move in line with each other for the foreseeable future.” Credit analyst Peter McClean indicated: “We expect to resolve the CreditWatch placement within the next two months, following further discussions with the management teams of GCO and Atradius,” Standard & Poor’s said. “We expect that the potential downside risk to the ratings will likely be limited to one notch.”

A.M. Best Co. has affirmed the financial strength rating of ‘A’- (Excellent) and the issuer credit rating of “a-” of China Insurance (Macau) Company Limited (CIM). The outlook for both ratings remains stable. “The ratings reflect CIM’s profitable underwriting performance, stable local market profile and adequate risk-adjusted capitalization, supported by the China Insurance Group through reinsurance and investment management,” Best explained. “CIM remained the second-largest insurer in 2008, maintaining a leadership position in several of its core business lines. The company has
reported consistent underwriting profitability over the past five years to 2008 as a result of disciplined underwriting. Nonetheless, the net realized and unrealized investment losses adversely impacted its operating profitability, leading to net operating losses in 2008. CIM’s premium portfolio is supported by a comprehensive reinsurance arrangement.” Best added that, given its prospective business growth and investment risks, along with its reinsurance arrangement in place, the rating agency “anticipates the company’s risk-adjusted capitalization, as measured by the Best’s Capital Adequate Ratio (BCAR), is likely to remain at an adequate level in the near term.” Best also indicated that “CIM maintains liquidity through prudent investment allocation, with more than 80 percent of invested assets in cash, bank deposits and listed debt securities at year-end 2008. Its equity market exposure remains low. Offsetting rating factors include a decline in the local solvency ratio, an increased expense ratio and continued slowdown in local economic activities.