Ratings Roundup: TT Club Mutual, Nat. Life/General (Oman)

A.M. Best Co. has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit rating of “a-” of the Bermuda-based Through Transport Mutual Insurance Association Limited (TTB) and its subsidiary, the UK-based TT Club Mutual Insurance Limited (TTI), trading collectively as TT Club. The outlook for both ratings remains stable. The ratings of TTI reflect the “integral part the company plays in TT Club’s strategy, as well as the reinsurance protection provided by TTB,” best explained. “TT Club is expected to maintain strong consolidated risk-adjusted capitalization in 2010, despite a small decrease in retained earnings. Capitalization is supported by a $30 million subordinated loan (issued in 2006), and the club benefits from an extensive reinsurance program. The club employs a prudent approach to setting reserves with a significant margin established above internal actuary’s best estimate.” Best also indicated that TT Club is “expected to report a combined ratio above 100 percent for the 2010 financial year in line with 2006-2009. In 2009, the impact of a number of large losses on the underwriting result was offset by a larger than usual reserve release following a revision of reserving methodology. Although claims experience for 2010 to date has been more favorable, a significant improvement in underwriting profitability is unlikely due to weak pricing for the club’s core business lines. Further ahead, underwriting results are expected to remain under pressure in the absence of sustained premium rate increases, while the club’s conservative investment portfolio is likely to make a positive but modest contribution to earnings.” Best noted that the club has a “good specialist business profile in the international marine transport and logistics insurance market. A superior service provision and strong industry involvement support the club’s business profile and contribute to consistent high policyholder retention (greater than 90 percent).”

A.M. Best Co. has downgraded the issuer credit rating (ICR) to “bbb” from “bbb+” and affirmed the financial strength rating of ‘B++’ (Good) of Oman’s National Life & General Insurance Company SAOC (NLGIC); in addition the outlook for both ratings remains negative. The rating action reflects “NLGIC’s deteriorating technical performance stemming from expansion into motor and medical risks and its weak enterprise risk management,” best explained. “Offsetting factors are the company’s strong capital position and good performance on its core life portfolio.” Best said that in its opinion, “NLGIC’s expansion into motor and medical business lines has worsened underwriting performance and changed its business profile from an established life insurer to a vulnerable composite insurer.” Best also said it believes “NLGIC’s management has been ineffective at writing motor and medical risks, resulting in combined ratios above 100 percent, with losses between OMR 1.5 and OMR 2 million in each of the last two years. This has more than offset any profit produced on its core life portfolio, with the company reliant on investment income to generate positive returns. Furthermore, in 2009, motor and medical risks accounted for approximately 50 percent of gross premiums, and the expectant concentration of these risks in NLGIC’s portfolio is likely to place further pressure on technical profitability.” In addition Best said that NLGIC has been “unable to demonstrate sufficient improvements in its risk management capabilities. The lack of company level controls is a major concern, particularly with regards to investment risk management and capital strategy. Any further deterioration in performance or insufficient improvements in risk mitigation is likely to place further downward pressure on the ratings.”