S&P Affms Rtgs on Trenwick Group & Units; Off Watch.NEW YORK--(BUSINESS WIRE)--Dec. 10, 1999-- Standard & Poor's Friday affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. its ratings on Trenwick Group Inc. and the 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. rating on Trenwick Capital Trust I. In addition, the ratings on Trenwick America 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. Corp. and Trenwick International Ltd. were affirmed. All ratings were removed from CreditWatch, where they were placed June 22, 1999, with negative implications (see list below). The outlook is stable. The ratings were placed on CreditWatch following Trenwick Group Inc.'s announcement of its planned acquisition of Chartwell Re Corp. and related operating insurance and reinsurance entities in an all-stock transaction. The ratings are based on extremely strong capital adequacy, improved business position, historically strong operating performance, partially offset by increased financial leverage, and a change in corporate strategy to growth through acquisition. Major Rating Factors: -- Capital adequacy, as measured by Standard & Poor's property/casualty capital model, is projected to be 219% on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis through 1999, which is considered extremely strong. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). equity at year-end 1999 is expected to exceed $500 million and will boost its ranking, based on capital, to be within the top 12 U.S. professional reinsurers. -- Chartwell's primary insurance book and participation at Lloyd's adds both geographic and product line 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. through well-established distribution channels to the Trenwick Group. The combination of Chartwell and Trenwick's U.S. reinsurance book provides expense synergy The enhanced result of two or more people, groups or organizations working together. In other words, one and one equals three! It comes from the Greek "synergia," which means joint work and cooperative action. opportunities, although some contraction contraction, in physics contraction, in physics: see expansion. contraction, in grammar contraction, in writing: see abbreviation. contraction - reduction in premium volume is expected, largely due to common ceding cede tr.v. ced·ed, ced·ing, cedes 1. To surrender possession of, especially by treaty. See Synonyms at relinquish. 2. company relationships. -- Operating performance historically has been very strong at Trenwick, producing returns on revenue (ROR ROR Ruby on Rails ROR Rate Of Return ROR Reach Out and Read (national pediatric literacy program) ROR Rotate Right ROR Revolutions On Request (artist group; Finland) ROR Rise of Rome ) of 15.8% over the past five years on a GAAP basis. Reserve strengthening ($18.7 million) and increased property catastrophe losses globally have depressed projected full-year earnings for 1999. Historically, Chartwell's ROR, while steadily improving, has averaged 11.8% over the past five years, and it is expected that the level of returns at Trenwick will decrease modestly. Chartwell's loss reserves at October 1999 are protected by a $100 million adverse development coverage, which should adequately protect earnings generated by acquisition. -- Financial leverage for the Trenwick Group increases to 38% on a full-year pro forma basis, and while higher than the range normally maintained at the group, it remains at a level consistent with the rating level. Interest coverage is expected to return to 5 times (x)-7x, and fixed-charge coverage is expected to return to 3x-4x, over the next three years. -- The transition to a growth-by-acquisition strategy increases the uncertainty of management's ability to integrate the newer operations without adversely impacting the established franchise. OUTLOOK: STABLE Standard & Poor's expects the combined entity's more diversified diversified (di·verˑ·s book of risk will reduce its dependency on any one market and will generate stable earnings growth over the next three years, Standard & Poor's said. --CreditWire -0-
RATINGS AFFIRMED; REMOVED FROM CREDITWATCH NEGATIVE
RATINGS
TO FROM
Trenwick America Reinsurance Corp.
Counterparty credit rtg A+/Stable A+/Watch Neg/--
Financial strength rtg. A+ A+/Watch Neg
Trenwick International Ltd.
Counterparty credit rtg. A+/Stable A+/Watch Neg/--
Financial strength rtg. A+ A+/Watch Neg
Trenwick Group Inc.
Counterparty credit rtg. BBB+/Stable BBB+/Watch Neg/--
Senior debt BBB+ BBB+/Watch Neg
Trenwick Capital Trust I
Preferred stock(a) BBB- BBB-/Watch Neg
Note: (a) Guaranteed by Trenwick Group Inc.
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