A.M. Best Upgrades Ratings of Bison Insurance Company Limited

A.M. Best Co. has upgraded the financial strength rating to A (Excellent) from A- (Excellent) and the issuer credit rating to "a" from "a-" of Bison Insurance Company Limited (Bison) (Charleston, SC).

The outlook for both ratings is stable.

The rating actions reflect Bison's historically excellent capitalization, consistent operating profitability driven by favorable underwriting results, conservative reserve levels and effective enterprise risk management controls. The ratings also recognize Bison's history of maintaining sufficient capital and financial resources to support its ongoing obligations.

Partially offsetting these positive rating factors are Bison's volatile underwriting results due to its low frequency high severity risk profile, coupled with its high net retained limits relative to its available capital. Additionally, the continually changing risk profile of Bison's primary insureds directly affects its risk profile. This is mitigated by the company's conservative reserving philosophy and the ongoing demonstrated support from its parent, Duke Energy Corp. (Duke Energy) (NYSE: DUK).

The risk management team of Duke Energy takes a holistic approach to managing its risks and utilizes the captive as an integral part in this process. Bison's long-term growth opportunities primarily depend on the business success of Duke Energy.

Bison's underwriting results have proven to be less volatile in recent years, enabling it to produce underwriting profits and increase its capital base. Duke Energy spun off its natural gas and pipeline business, which generated substantially all of its large property losses, specifically, Moss Bluff and Gulf hurricane losses.

Given recent positive movement in Bison's ratings, A.M. Best believes the company is well positioned at its current rating level, and the ratings are not expected to be upgraded and/or its outlook revised for the near term. The potential for future earnings volatility and capital position have already been considered in A.M. Best's ratings process. Key rating factors that could lead to negative rating actions include a significant and sustained decline in Bison's risk-adjusted capitalization as measured by its Best's Capital Adequacy Ratio (BCAR), net operating performance results that do not meet A.M. Best's expectations, or a material shift in its risk profile that could potentially undermine the stability of its ratings. In addition, deterioration in the credit profile of Duke Energy could impact Bison's ratings.

A.M. Best is a rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world.

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

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

More Information:

http://www.ambest.com

http://www.ambest.com/captive

Best's Credit Rating Methodology:

http://www.ambest.com/ratings/methodology

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