A.M. Best Assigns A Rating to Newly Formed Trenwick Group.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Oct. 5, 2000 A.M. Best Co. has assigned a group financial strength rating of A (Excellent) to the 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. operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. of Trenwick Group Ltd., Bermuda and removed the ratings from under review. This rating action applies to Trenwick America Reinsurance Corporation (US), Trenwick International Limited (UK) and LaSalle Re Ltd. (Bermuda) and follows the completed merger of Trenwick Group Inc. with LaSalle Re Holdings Ltd. resulting in the formation of a new Bermuda-based holding company. In a separate but related action, A.M. Best has assigned a financial strength rating of A (Excellent) to the strategic operating subsidiaries of the group, Chartwell Insurance Company, The Insurance Corporation of 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 and Dakota Specialty Insurance Company, collectively known as the Canterbury Financial Group. The application of a group rating to Trenwick's reinsurance subsidiaries reflects A.M. Best `s view that each of these entities are considered core and integral to Trenwick Group Ltd.'s reinsurance strategy and important to its ongoing market viability. In addition, each of these companies are material contributors to the group's balance sheet strength and operating performance, as well as being generally well established within their individual market segments. The rating action reflects the group's improved earnings prospects, bolstered market presence, and expanded distribution capabilities derived from the combination of Trenwick and LaSalle Re's existing reinsurance operations. Since 1998, Trenwick has sought to achieve growth through acquisition, adding the operations of Sorema UK Limited in 1998 and Chartwell Re Corporation in 1999. With established platforms now located in each of the major insurance markets--United States, United Kingdom, and Bermuda--the group ranks among the top 30 global reinsurers, writing roughly $900 million of gross premiums annually. In addition to size and scale, A.M. Best believes this combination provides greater risk diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. across product lines and geographical territories, positioning Trenwick to take full advantage of new opportunities, including any near-term improvement in the current reinsurance market. Finally, Trenwick's operating subsidiaries maintain strong capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. supported by a disciplined underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. approach and conservative risk management strategy. Offsetting these strengths is the recent downturn in the group's earnings stemming from heavy catastrophe-related losses, adverse loss development and its participation in the Lloyd's market, which has suffered significant loss emergence. In addition, near-term earnings are expected to remain constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by merger-related charges and prevailing competitive market conditions. While A.M. Best recognizes the diversification benefits derived from each of Trenwick's recent transactions, its consolidated financial leverage has substantially increased and now measures just over 40% debt plus preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. to total capital. Importantly, the group's lack of earnings and the recent corporate restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). , which established a new Bermuda-based holding company structure, disproportionately dis·pro·por·tion·ate adj. Out of proportion, as in size, shape, or amount. dis  pro·por burdens the
U.S. insurance subsidiaries to service the debt remaining onshore on·shore adj. 1. Moving or directed toward the shore: an onshore wind. 2. Located on the shore: an onshore beacon; an onshore patrol. adv. at an intermediate holding company. It is expected that associated near-term dividend obligations will likely result in a modest decapitalization of the U.S. insurance group and sub-par fixed charge coverage. However, on an interim basis, excess capital at the U.S. subsidiaries based on A.M. Best's capital adequacy model and a guarantee of the credit facility by Trenwick Group Ltd. alleviates this significant rating concern. The group's rating outlook, though, is uncertain and largely dependent upon management's ability to execute its financial plan and restore historical profitability levels in 2001, providing for fixed charge coverage ratios that are more in line with its rating. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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