A.M. Best Affirms Ratings of the Catlin Insurance Companies

LONDON--(BUSINESS WIRE)-- A.M. Best Europe – Rating Services Limitedhas 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) and Catlin Re SwitzerlandLtd. (Catlin Re).

Additionally, A.M. Best has affirmed the debt rating of “bbb” on USD 600 million preferred stock issued by CICL, as well as the ICR of “bbb” of Catlin Underwriting (CU) (United Kingdom) and debt ratings of “bbb-” on USD 27 million subordinated floating rate notes and EUR 7 million subordinated floating rate notes issued by CU. A.M. Best also has affirmed the FSR of A (Excellent) and ICR of “a+” of Lloyd’s Syndicate 2003 (United Kingdom), which is managed by Catlin Underwriting Agencies Limited. At the same time, A.M. Best has affirmed the ICR of “bbb” of Catlin Group Limited(CGL) (Bermuda), the ultimate parent company of the Catlin group. The outlook for all ratings remains stable.

The ratings of syndicate 2003 reflect the financial strength of the Lloyd’s market, which underpins the security of all Lloyd’s syndicates. In addition the syndicate benefits from the financial flexibility provided by CGL. Catlin UK and Catlin Re benefit from the explicit support provided by CICL, through its provision of capital to support growth. Since the beginning of 2011, the intra-group reinsurance, which was previously provided by CICL, has been underwritten by the Bermuda-based branch office of Catlin Re.

The Catlin group’s consolidated risk-adjusted capitalisation is expected to remain strong, despite anticipated deterioration during 2011, due to premium growth and a reduction in retained earnings. At year-end 2011, consolidated shareholders’ funds are expected to be modestly lower than the <money>USD 3.4 billion reported at year-end 2010, taking into account estimated catastrophe losses in the first half of the year of USD 534 million (net of reinsurance and reinstatements). The impact of large losses in the second half of 2011 on earnings and capital is likely to be limited by recoveries from the group’s worldwide catastrophe aggregate reinsurance programme. The aggregate deductable on the programme has been substantially eroded by first half 2011 losses.

In 2011, the group is expected to report a consolidated pre-tax profit, albeit materially lower than the USD 406 million reported in 2010. An underwriting loss is anticipated, reflecting the group’s exposure to catastrophes in the first half of the year, including the earthquakes in New Zealand and Japan, the Australian floods and the U.S. tornadoes and assuming average catastrophe experience in the second half of 2011. The group’s attritional loss ratio is expected to improve, in spite of strong competition in core business lines. Investment income from the group’s conservative portfolio of cash and fixed income investments is likely to be lower, due to low interest rates and the absence of the investment gains that supported performance in 2010.

The Catlin group maintains a robust business profile, supported by its well-diversified portfolio of property/casualty risks. Underwriting hubs in the United Kingdom, Bermuda, United States 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 syndicate 2003, which represents approximately 65% of consolidated gross premium income.

In 2011, Catlin has reduced gross premiums written from its UK/London hub in response to price competition for London market wholesale business, while locally placed U.S. and international business has remained the main focus of growth. Further expansion of the group’s U.S. casualty portfolio is expected, but A.M. Best believes it will be difficult to grow this business profitably given prevailing soft market conditions and economic uncertainties.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding Universal BCAR”; “Rating Members of Insurance Groups”; “Natural Catastrophe Stress Test Methodology”; “Equity Credit for Hybrid Securities”; “Rating New Company Formations”; “Rating Lloyd’s Syndicates”; and “A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company.Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Company
Reza Pakravan
Financial Analyst
+(44) 20 7397 0293
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or
Catherine Thomas
Director, Analytics
+(44) 20 7397 0281
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or
Carole Lovell
Public Relations Associate
+(1) 908 439 2200, ext. 5445
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or
Jim Peavy
Assistant Vice President, Public Relations
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Source: A.M. Best Company