AM Best assigns financial strength rating of A- to SAC Re
Ratings firm, AM Best has assigned a financial strength rating of A- (Excellent) and issuer credit rating of “a-” to Bermuda-based SAC Re.
The outlook assigned to both ratings is stable.
The assets of SAC Re will be managed by SAC Capital Advisors, L.P., a global firm based in Connecticut, the predecessor of which was founded in 1992 by Steven A. Cohen. In December, SAC Capital Advisors purchased a 5.2 percent stake in Bermuda-based Validus Re.
According to AM Best, the ratings for SAC Re are based on its excellent risk-adjusted capitalisation, knowledgeable management team and prudent business plan.
Partially offsetting these positive rating factors are the start-up nature of the company, the greater investment risk associated with an alternative investment strategy, as well as the increased competition in the reinsurance marketplace that may challenge some of the company’s business plans.
AM Best is concerned that there is a possibility that SAC Re could be exposed to a convergence of events due to the adjoining of underwriting risk and the present risk in an alternative investment strategy. These risks could have an adverse affect on the company’s risk-adjusted capital.
However, the company said, SAC Re’s low underwriting leverage, experienced underwriting team, partially hedged nature of the portfolio along with its investment manager’s lengthy investment track record help mitigate these concerns.
In addition, AM Best anticipates that SAC Re’s management will be challenged by competition from established reinsurers as well as other start-up entities. The addition of more capacity to an already overcapitalised reinsurance marketplace could pressure underwriting margins.
Key rating triggers that could result in positive rating actions would be SAC Re’s meeting and/or exceeding its business plan over the long term.
Key rating triggers that could result in negative rating actions would be SAC Re not executing its business plan over the long term.
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Published Jul 10, 2012 at 11:15 am (Updated Jul 10, 2012 at 11:14 am)