A.M. Best Downgrades Ratings of International Energy Insurance plc

LONDON--(BUSINESS WIRE)-- A.M. Best Europe – Rating Services Limited has downgraded the issuer credit rating to “b” from “b+” and affirmed the financial strength rating of C++ (Marginal) of International Energy Insurance plc(IEI) (Nigeria). The ratings remain under review with negative implications.

The downgrade reflects weak internal controls and risk management. The under review status reflects uncertainties over the future divestment from subsidiary companies. Offsetting this is a fair level of risk-adjusted capitalisation.

In 2009, IEI suffered a consolidated loss after tax of NGN 3.9 billion (USD 25.4 million). The loss was driven by a weak underwriting performance (after taking into consideration management expenses), losses within non-insurance subsidiaries and other non-technical expenses.

A.M. Best considers that IEI’s level of risk management is poor. Although meeting regulatory requirements, the company does not employ any formalized modeling tools and reserves are not actuarially assessed. Furthermore, the company now has only a limited level of control over subsidiary companies that contributed significant losses in 2009.

The under review status reflects A.M. Best’s concerns and uncertainty over the future divestment from subsidiary companies. Although the operations of certain subsidiaries have been unbundled from that of the insurance company and future divestment is likely, subsidiaries had negative net worth as at December 2009. A.M. Best will monitor the situation over the coming months and revisit the rating no later that the end of March 2011.

Partially mitigating the rating is a fair level of risk -adjusted capitalisation. Although the sale of certain subsidiaries that are in a net liabilities position might have a positive impact on risk-adjusted capitalisation, A.M. Best considers that the final outcome is far from clear.

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 utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; and “Assessing Country Risk”. Methodologies can be found at www.ambest.com/ratings/methodology.

The ratings were changed following an appeal to the initial rating outcome due to additional information provided by the company.

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.

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A.M. Best Europe
Tim Prince, +(44) 20-7397-0320
Financial Analyst
timothy.prince@ambest.com
or
Carlos Wong-Fupuy, +(44) 20-7397-0287
Assistant General Manager
carlos.wong-fupuy@ambest.com
or
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, +(1) 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Source: A.M. Best Europe