Ratings Recap: Generali (France), Tokio Marine Pacific, swisspartners

A.M. Best Co. has affirmed the financial strength rating of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-” of Generali Vie and Generali IARD. Best also affirmed the ICR of “a-” of the non-operating parent, Generali France S.A. The outlook on all ratings is stable. All companies are domiciled in Paris, France, except where specified. The ratings reflect Generali France and its main subsidiaries’ “diversified business profiles and good risk-adjusted capitalizations,” said Best. However, Generali France’s “reduction in profitability, with life business affected by investment markets and non-life affected by catastrophe losses” is seen as an offsetting factor. The ratings also reflect the subsidiaries importance to the group and the implicit support of the group’s ultimate parent, Italy’s Assicurazioni Generali S.p.A. Best noted that Generali France “maintains a strong competitive position in France with consolidated gross written premiums expected to be in excess of €15 billion [$20.3 billion] at year-end 2009.” Best also indicated that it “expects premiums to increase in line with market growth rates, with the entities concentrating on profitability. Both Generali Vie and Generali IARD have a diversified range of products, provided through Generali France’s extensive distribution network.” In addition Best expects Generali France’s prospective profitability to remain robust. Generali Vie’s performance is expected to “show improved results in 2009 as a result of improving markets conditions, with Generali IARD’s profitability reducing in 2009, mainly owing to catastrophe losses impacting the French market.” Best also is expecting a combined ratio to be maintained below 100 percent. In Best’s opinion, Generali Vie and Generali IARD’s capital positions have “improved following sharp decline in investment market conditions during 2008, which have seen a partial rebound in 2009.” Bests aid it believes that Generali France’s “dividend policy and investment performance are likely to be the main drivers for the companies’ prospective capital levels.”

A.M. Best Co. has affirmed the financial strength rating of ‘A+’ (Superior) and issuer credit rating (ICR) of “aa-” of Tokio Marine Pacific Insurance Limited (TMPI), which is based on Guam. The outlook for both ratings is stable. The ratings reflect TMPI’s “track record of positive operating results, prudent investment strategy and consistent growth in surplus,” said Best. “The ratings also acknowledge TMPI’s parent, Tokio Marine & Nichido Fire Insurance Co., Ltd.’s brand name in certain local segments and the explicit support TMPI receives in the form of financial guarantee and reinsurance.” Best also noted that TMPI “recorded a consistent positive underwriting income of $7 million in 2008, up from $5 million in 2007. Consequently, without any dividend payout, the company’s surplus increased to $22 million in 2008 from $15 million in 2007. Partially offsetting factors include the risk of concentration with regard to the potential catastrophic exposure in Guam and the underwriting volatility associated with the change in the retention of its reinsurance program.” In addition Best pointed out that “less favorable claim experience in TMPI’s core business line, its group medical business, increased the company’s overall loss ratio to 67.6 percent in 2008 from 61.2 percent in 2007. With the termination of TMPI’s accident and health quota share reinsurance business with its parent, and the change in the retention limit of its catastrophe excess of loss reinsurance treaty, the sustainability of TMPI’s operating profitability remains uncertain going forward.”

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit ratings of “a-” of Liechtenstein-based swisspartners Versicherung AG and Cayman Islands-based swisspartners Insurance Company SPC Limited. The outlook for all ratings remains stable. swisspartners Versicherung AG and swisspartners Insurance Company SPC Limited are owned by swisspartners Investment Network AG whose majority shareholder is Liechtensteinische Landesbank AG (LLB). Best said the “ratings reflect the companies’ unique business profiles as insurers specializing in life cover for high net worth individuals and their strong risk-adjusted capitalizations. The ratings also take into account the ultimate ownership by LLB. swisspartners Versicherung AG and swisspartners Insurance Company SPC Limited have experienced good business growth in the last couple of years, despite difficult market conditions. Both companies have distinctive business profiles as life insurance companies specializing in the sale, underwriting and distribution of high face amount life insurance policies and annuities, which provide tax-optimized solutions to high net worth individual swisspartners Insurance Company SPC Limited focuses on the underwriting and distribution of tax compliant wealth management products worldwide and with an emphasis on the needs of U.S. passport holders. The company markets solely outside of the United States and with the exception of 2008, swisspartners Insurance Company SPC Limited’s earnings are relatively stable, driven by fee revenue generated from segregated fund assets under management, which have remained fairly stable. By contrast, swisspartners Versicherung AG concentrates on the European market. Its premium income has been more volatile due to its higher reliance on single premium policies and due to the tax asset changes in Germany, its main market. Nevertheless, assets under management have continued to increase, and profits have remained relatively stable.” Best added that it believes that both companies “will maintain their strong risk-adjusted capitalizations as they have minimal general fund investment exposure (customer assets are predominantly held in segregated portfolios with modest guaranteed minimum benefits), and the majority of mortality risk is ceded to reinsurers rated ‘A ‘(Excellent) and above by A.M. Best. In Best’s opinion, the two insurers benefit from their ownership link with LLB, and A.M. Best expects that LLB would offer financial support to the two insurance companies should the need arise. Partially offsetting these positive factors is the ongoing correlation of earnings with the fluctuation of the market value of assets under management and the dependence upon third-party reinsurers to underwrite the majority of individual policies. The ratings also consider the regulatory and legal risks such as know-your-customer rules and the changing laws, tax statutes and regulations, which can lead to a high amount of surrenders (as experienced in 2009 for swisspartners Versicherung AG).”