Best Affirms Catlin Insurance Companies ‘A’ Ratings; Outlook Stable

A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating (ICR) of “a” of Bermuda-based Catlin Insurance Company Limited (CICL), Catlin Insurance Company (UK) Ltd. Houston-based Catlin Insurance Company, Inc. (CICI) and Delaware-based Catlin Specialty Insurance Company.

In a separate bulletin Best also affirmed the ratings of Lloyd’s Syndicate 2003, which is managed by Catlin Underwriting Agencies Limited (CUAL) [See IJ web site –

Best also affirmed the ICR of “bbb” of Bermuda-based Catlin Group Limited (CGL), the ultimate parent company of the Catlin group, and the debt rating of “bbb” on $600 million preferred stock issued by CICL, as well as the ICR of “bbb” of UK-based Catlin Underwriting (CU) and the debt ratings of “bbb-” on $27 million subordinated floating rate notes and €7 million [$8.9 million] subordinated floating rate notes issued by CU. The outlook for all ratings remains stable.

Best said it expects CICL’s consolidated risk-adjusted capitalization to “remain strong and supportive of its growth plans in 2010, despite losses from the Chilean earthquake (cost of $140 million net of reinsurance and reinstatements) and the Deepwater Horizon oil rig explosion (net cost of $40 million).

“Net premium income is expected to rise by up to 10 percent in 2010 (2009: $3.168 billion) as the Catlin group continues to expand in the US and international markets (predominantly in Europe and Asia-Pacific). Catlin UK, CICI and Catlin Specialty continue to benefit from explicit support provided by CICL through the provision of reinsurance and capital to support growth.”

Best also indicated that the Catlin group is expected “to produce a good pre-tax profit in 2010, although lower than the $602 million reported in 2009, subject to normal catastrophe activity in the remainder of the year. The group’s attritional loss ratio is expected to improve, underpinned by the better rates for business written during 2009 and subsequently earned in 2010.”

However, the report also forecast a “rise in the loss ratio from the 57.6 percent achieved in 2009 is anticipated, partly owing to the high incidence of catastrophe and large losses during the first half of 2010. Investment income from the group’s conservative portfolio of cash and fixed income investments is likely to reduce due to low interest rates and the absence of substantial investments gains, which supported performance in the previous year.”

In conclusion Best noted that the Catlin group maintains a “robust business profile, supported by its well-diversified portfolio of property/casualty risks. Underwriting hubs in the UK, Bermuda, US and international (Europe, Asia-Pacific, Canada, Guernsey and South America) markets provide access to a broad range of business.

“The group continues to benefit from its strong competitive position in the London market, supported by the profile of Lloyd’s Syndicate 2003, which represents approximately 65 percent of consolidated gross premium income.

“The US and international markets remain the main focus for growth in 2010, in spite of the challenging pricing environment. However, the group has tempered its growth plans for US casualty business, particularly for longer-tail risks, owing to soft market conditions and concern relating to the effect of weak economic conditions on claims experience.”

Source: A.M. Best