Ratings Recap: Fairfax (debt), Swiss Re (notes), Rembrandt,

Standard & Poor’s Ratings Services has assigned its preliminary ‘BBB-‘ senior unsecured debt, ‘BB+’ subordinated unsecured debt, and ‘BB’ preferred shares ratings on Fairfax Financial Holdings Ltd.‘s US$2 billion universal shelf, which was filed on Sept. 18, 2009. S&P said Fairfax exhausted its prior Aug. 31, 2009, US$1 billion shelf to fund the pending acquisition of the outstanding common shares of Odyssey Re that it currently does not own. S&P added that it is “unaware of any new strategic expansion initiatives that would require an immediate draw upon the new shelf. In addition it said the “ratings reflect Fairfax’s strong business and financial profile. Fairfax, through its insurance operating subsidiaries, including Northbridge Financial, Crum & Forster, and Odyssey Reinsurance, maintains a competitive presence in the North American commercial insurance marketplace, as well as in the global reinsurance market. Fairfax reported consolidated pretax operating income of US$373 million in the first half of 2009, a satisfactory combined loss and expense ratio of 98.4 percent, and total shareholders’ equity of $5.6 billion.”

A.M. Best Co. has assigned a debt rating of “a+” to the $750 million (€525 million) 4.125 percent senior unsecured notes issued by Swiss Re Treasury (US) Corporation and guaranteed by Swiss Reinsurance Company Limited. The assigned outlook is stable.
“The notes are issued under Swiss Re’s European Medium-Term Note Program (EMTN),” said Best. The proceeds will be utilized for general corporate purposes.

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and the issuer credit rating of “a” of Bermuda-based Rembrandt Insurance Company, Ltd., a captive operation of Vitol Holding B.V. (Rotterdam), a global oil trading company. The outlook for both ratings is stable. “The ratings reflect Rembrandt’s very strong risk-adjusted capitalization, robust financial performance and stable business profile,” said Best. “An offsetting factor remains high concentration in the marine cargo line of business.” Best added that it believes that Rembrandt’s risk-adjusted capitalization will remain strong, with an improving position in 2009 and 2010. The company’s capital position is supported by steady historical retained earnings arising from its strong insurance profits and prudent dividend philosophy. In 2008, Rembrandt’s capitalization was boosted by a 28 percent increase in retained earnings to USD 95 million. Rembrandt’s risk-adjusted capitalization also is supported by a robust reinsurance program placed with secure rated companies.” Best also indicated that it believes “Rembrandt’s financial performance will remain strong in 2009 and 2010, with very good technical results of approximately $ 20 million per annum, resulting from a positive underwriting performance. In 2008, Rembrandt’s net income increased by 22 percent to $ 25.7 million, resulting from good claims experience, which offset a 30 percent reduction in investment income.” In addition Best expects Rembrandt’s investment income to remain subdued but positive as the unsettled investment markets persist into 2009 and 2010. Best considers Rembrandt’s investment strategy to be very conservative, with no equity investment and up to 88 percent invested in a combination of cash and a callable loan to its parent.”