A.M. Best Removes Ratings of Torus Insurance Holdings Limited’s U.S. Subsidiaries From Under Review; Assigns Negative Outlook

A.M. Best has removed from under review with negative implications and affirmed the financial strength rating of A- (Excellent) and issuer credit ratings of "a-" of Torus Specialty Insurance Company (Torus Specialty) and Torus National Insurance Company (Torus National).

Both companies are domiciled in Wilmington, DE and are wholly owned subsidiaries of their ultimate parent, Torus Insurance Holdings Limited (Torus Holdings) (Bermuda). All ratings have been assigned a negative outlook.

The rating actions follow the completion of the acquisition of Torus by Enstar Group Limited (Enstar)and Stone Point Capital (Stone Point) on April 1, and A.M. Best's review of the new owners' plans for the Torus group.

These ratings are based upon A.M. Best's criteria "Rating Members of Insurance Groups" and take into consideration the roles and strategic importance of Torus Specialty and Torus National to Torus' overall U.S. strategy. In addition, the ratings reflect the explicit support provided through substantial quota share reinsurance of Torus Specialty and Torus National's net and discontinued lines of business by Torus Insurance (Bermuda) Limited (Torus Bermuda). Furthermore, Torus provides an aggregate stop loss agreement to Torus Specialty and Torus National. The ratings also acknowledge the implied support of future parental commitment.

Torus Specialty and Torus National continue to maintain strong stand-alone capitalization, which is driven by low underwriting leverage and negligible investment leverage as well as capital contributions from Torus Holdings. A.M. Best will continue to closely monitor the operating performance of these relatively new companies given the execution risk to achieve new business projections in the highly competitive commercial lines marketplace.

Based on the group ratings, any future rating actions for Torus Specialty and Torus National will likely be in accordance with any future rating actions on Torus group. Torus' consolidated historical financial performance, as well as those of Torus Specialty and Torus National, has been weak with overall losses made each year since 2010. Management, supported by the group's new owners, is committed to improving financial performance and has taken actions to achieve significant expense savings as well as exiting underperforming lines of business. However, despite these actions, A.M. Best believes that achieving sustainable profitable results will remain a challenge, given the strong competition in Torus' main business lines.

Positive rating factors supporting the affirmations include the support of Enstar and Stone Point. The group's new owners are expected to provide strategic and operational support to Torus, as well as financial assistance if needed. Both have a proven track record of building strong and profitable insurance businesses, Enstar in insurance run off and Stone Point in active underwriting.

Positive rating actions could follow if management delivers on its plan to improve financial performance for the Torus group of companies. Negative rating actions could follow if Torus continues to underperform against its own plans and A.M. Best's expectations.

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 can be found at ambest.com/ratings/methodology.

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

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