A.M. Best Affirms Ratings of Catlin Group Limited and Its Subsidiaries [Manufacturing Close – Up]

A.M. Best Europe - Rating Services Limited has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of Catlin Insurance Company Limited (CICL) (Bermuda), Catlin Insurance Company (UK) Ltd. (Catlin UK) (United Kingdom) and Catlin Re Switzerland Ltd. (Catlin Re) (Switzerland).

A.M. Best also has affirmed the ICRs of "bbb" of Catlin Underwriting (CU) (United Kingdom), a non-operating holding company and Catlin Group Limited (CGL) (Bermuda), the ultimate parent company of the Catlin group.

Concurrently, A.M. Best has affirmed the debt ratings of "bbb" on USD 600 million preferred stock issued by CICL as well as "bbb-" on USD 27 million subordinated floating rate notes and EUR 7 million subordinated floating rate notes issued by CU. The outlook for all the above ratings remains stable.

The FSR of A (Excellent) and ICR of "a+" of Lloyd's Syndicate 2003 (United Kingdom), which is managed by Catlin Underwriting Agencies Limited, remain unchanged following the rating actions taken on 19 July 2013, on the Lloyd's market. At that time, the outlook for both ratings was revised to positive from stable. However, due to an administrative error, these rating actions were not released until 22 July 2013. The ratings of Lloyd's Syndicate 2003 reflect the financial strength of the Lloyd's market, which underpins the security of all Lloyd's syndicates.

Catlin UK and Catlin Re's ratings benefit from the explicit support provided by CICL, in the form of capital contributions to sustain growth. Additionally, Catlin Re remains of strategic importance to the Catlin group as the provider of significant intra- group reinsurance protection and as the platform for expansion of the group's reinsurance business in Europe.

CGL's consolidated risk-adjusted capitalisation is expected to remain at a strong level in 2013, supported by high retained earnings. Additionally, the adverse development cover purchased in 2012 remains in place, limiting CGL's consolidated underwriting risk exposure.

Pre-tax profits in 2013 are expected to remain comparable to the USD 339 million reported in 2012, subject to normal catastrophe activity for the rest of the year. Despite exposure to the US tornadoes and the European floods during the first half of the year, A.M. Best expects a combined ratio between 90 percent and 95 percent, supported by rate increases, largely derived from the major loss affected classes of business. Contribution from the group's conservative investment portfolio of cash and fixed income securities is likely to remain low, reflective of the low interest rate environment.

The Catlin group maintains a robust business profile, supported by its well-spread underwriting hubs in the United Kingdom, Bermuda, United States and other international markets-including Europe, Asia- Pacific, Canada, Guernsey and South America-which provide access to a broad range of property/casualty business. In spite of the group's strong competitive position in the London market, which is supported by the profile of Syndicate 2003 (accounting for 60 percent of consolidated gross premium income), prospective growth is expected to target the better priced segments of the local US and international markets.

Positive rating actions are unlikely in the near future for the Catlin group, whereas unexpected weak operating performance or a deterioration in its risk-adjusted capitalisation could lead to negative rating pressure.

A factor that may lead to positive or negative rating actions for Lloyd's Syndicate 2003 is a change in the ratings of the Lloyd's market, which currently has an FSR of A (Excellent) and an ICR of "a+", with a positive outlook.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology: ambest.com/ratings/methodology.

A.M. Best Company is an insurance rating and information source.

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