Best Affirms Lloyd’s Syndicate 33 (Hiscox) ‘A’ Ratings; Outlook Stable

A.M. Best Europe – Rating Services Limited has affirmed the Best’s Syndicate Rating of ‘A’ (Excellent) and issuer credit rating (ICR) of “a+” of Lloyd’s Syndicate 33, which is managed by Hiscox Syndicates Ltd (HSL).

Best has also affirmed the ICR of “bbb+” of Hiscox Ltd (Bermuda), the ultimate parent holding company of the Hiscox group of companies, including HSL. The outlook for all ratings remains stable.

In a separate bulletin Best also announced the affirmation of all of the ratings of Hiscox principal operating companies.

Syndicate 33’s financial strength is supported by “strong consolidated risk-adjusted capitalization at Hiscox Ltd, in addition to the underlying strength of the Lloyd’s market,” said Best.

“Hiscox Dedicated Corporate Member (HDCM), Hiscox Ltd’s Lloyd’s corporate member, provides 72.5 percent of the syndicate’s capacity for the 2010 year of account,” Best’s analysis continued. “The non-aligned capacity is provided by Lloyd’s Names. HDCM’s funds at Lloyd’s requirement for the 2010 year of account is met in part by a £150 million [$240.44 million] letter of credit facility. Stamp capacity is expected to reduce to £900 million [$1.443 billion] for the 2011 year of account (2010: £1 billion [$1.603 billion]), due to competitive rating conditions for the syndicate’s main lines of business.

“On an annually accounted basis, the combined ratio is expected to deteriorate in 2010 from the excellent 76 percent achieved in 2009, due to rate weakening for the syndicate’s catastrophe-exposed reinsurance business and an increase in catastrophe losses. The syndicate maintains a risk-averse asset allocation strategy, which is expected to support a solid net investment yield, albeit reduced from 7 percent in 2009 (including net realized and unrealized gains).”

Best added that on a “year of account basis, 2007 closed with an excellent return on capacity of 31.7 percent, a result that was supported by robust pricing for the syndicate’s catastrophe-exposed property and energy lines of business.

“Syndicate 33 has an excellent market profile as a specialist underwriter of a diverse range of business classes. The syndicate benefits from strong links with other Hiscox group entities and continues to write certain lines of business in conjunction with Hiscox Insurance Company (Guernsey) Limited and Hiscox Insurance Company Limited.”

Best added that in its opinion, the syndicate benefits from a strong risk management framework that is embedded across the Hiscox group.”

Source: A.M. Best