A.M. Best Affirms Ratings of CastlePoint Reinsurance; Assigns Ratings to CastlePoint Insurance and CastlePoint Holdings.OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR (Free System Resource) In Windows 3.x, the amount of unused memory in various 64K blocks reserved for managing current applications. Every open window takes some space in this area. See Windows memory limitation. ) of A- (Excellent) and the issuer credit rating (ICR (Intelligent Character Recognition or Image Character Recognition) The machine recognition of hand-printed characters as well as machine printing that is difficult to recognize. ) of "a-" of CastlePoint Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. Company Limited (CPRe) (Bermuda). Concurrently, A.M. Best has assigned an FSR of A- (Excellent) and an ICR of "a-" to CastlePoint Insurance Company (CPIC CPIC Canadian Police Information Centre CPIC China Pacific Insurance (Group) Co. Ltd. CPIC Capital Planning & Investment Control CPIC Combined Press Information Center CPIC Coalition Press Information Center ) (New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of ). A.M. Best has also assigned an ICR of "bbb-" to CastlePoint Holdings LTD LTD 1 Laron-type dwarfism 2 Leukotriene D 3 Long-term depression, see there 4. Long-term disability (CPHL CPHL Central Public Health Laboratory (London, UK) CPHL Central Professional Hockey League CPHL Calgary Puck Hockey League ) (Bermuda) [NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CPHL]. The outlook for all ratings is stable. The ratings for all CastlePoint companies take into consideration the additional financial flexibility derived through CPHL's successful initial public offering, which raised $117 million on March 22, 2007. This capitalization is in addition to the near $265 million that CPHL raised in a private placement offering in April 2006. The affirmation of CPRe's ratings reflect its strong risk-adjusted capitalization, historically profitable core book of businesses assumed from Tower Group, Inc. (Tower) (New York, NY) and its experienced management team. Additionally, through the first year of operations, CPRe operated within the parameters of the business plan presented to A.M. Best during last year's initial rating process. In 2007, CPRe increased its third-party assumed writings on the January 1 renewal date, but CPRe still derives the majority of its business from Tower. Somewhat offsetting these rating strengths are CPRe's revenue concentration, which could lead to potential correlation risk, execution risk in meeting its five-year business plan and the risks associated with accurately pricing new business. The company may also face increasing competition in its selected market segments from new entrants and established carriers competing for business. The ratings assigned to CPIC take into consideration the approximate $80 million of contributed capital during the first quarter of 2007; the expectation of CPIC maintaining adequate risk-adjusted capitalization during its first five years of operation; and the anticipated favorable operating results and access to profitable revenue streams through the planned pooling arrangements with Tower. An experienced management team has been hired to write both traditional and non-traditional program business in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . CPIC intends to target short-tail, low catastrophe-exposed risks. All program business will be managed by CPIC's immediate parent company, CastlePoint Management Corp. (Delaware). Somewhat offsetting these favorable attributes are CPIC's reliance on Tower for a significant amount of its revenue base in its early years of operation, the execution risk of meeting its five-year business plan and the risks associated with accurately pricing new business in light of increased market competition. The majority of CPIC's capital was sourced by net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from two 30-year trust preferred securities issued by CastlePoint Management. A.M. Best believes that CPIC's capital is impacted by this subordination, but these concerns are largely mitigated by the fact that the trust securities are ultimately guaranteed by CPHL, and the company plans to cover the interest expense of the trust preferred securities through non-insurance earnings and support from CPHL. CPHL, the ultimate parent of CPRe and CPIC was sponsored by Tower. As CPHL's initial investor, Tower currently owns approximately 9.0% of CPHL shares on a fully-diluted basis. Financial leverage, although supportive of the current rating level, is at the high-end of the acceptable range for new company formations. However, interest coverage measures are projected to be favorable during the five-year plan Five-Year Plan, Soviet economic practice of planning to augment agricultural and industrial output by designated quotas for a limited period of usually five years. . Tower has produced solid underwriting results as evidenced by a five-year statutory combined ratio of 88.2%. However, A.M. Best believes that both CPRE and CPIC's results could be impacted by Tower's appetite for growth and acquisitions, as well as its exposure to catastrophes due to its revenue concentration in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. . A.M. Best will closely monitor the flow of business to CPRe and CPIC from Tower as well as CPRe's and CPIC's capital flows to ensure that there is no material deviations from projections used to establish these ratings. Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion