Financial strength rating affirmed

Ratings agency A.M. Best Co. has affirmed the financial strength rating of A (excellent) of the reinsurance subsidiaries of Bermuda-based Platinum Underwriters Holdings, Ltd.

At the same time Best has affirmed the "bbb plus" rating of the group's equity security units issued by Platinum Underwriters Finance, Inc. (Delaware) and guaranteed by Platinum. Best said the outlook for all ratings is stable. "The rating reflects the group's excellent capitalisation and strong operating performance since its inception in late 2002," said the report published yesterday. "In 2003, the group reported a combined ratio of 84.7 percent and increased total capital 13.8 percent to $1.2 billion. Included in capital is $137.5 million in equity security units which are mandatorily convertible to common stock in 2005."

The group, originally formed to assume the reinsurance operations of The St. Paul Companies, has no insurance obligations related to business produced prior to 2002. Additionally, Best said Platinum has effectively utilised its "incumbent status" inherited from St. Paul to adhere to its initial business plan and to establish itself as a multi-line global reinsurer undertaking casualty, property and marine and finite risks. "Platinum's strengths are partially offset by increased competition from both established reinsurers as well as other reinsurance companies formed in the wake of the September 11th attacks," said the release. "This competition, combined with a light catastrophe period, has already resulted in a softening of rates in some of the group's core markets, and could potentially reduce expected returns." The financial strength ratings of A (Excellent) have been affirmed for the following operating subsidiaries of Platinum Underwriters Holdings, Ltd., Platinum Underwriters Reinsurance, Inc., Platinum Re (UK) Ltd., Platinum Underwriters Bermuda, Ltd.

Scottish Re 'faces challenges'

Ratings agency A.M. Best Co. has assigned indicative ratings of "bbb minus" senior debt, "bb plus" subordinated debt and "bb" preferred stock to Scottish Re Group Ltd.'s $750 million shelf registration.

A.M. Best has also assigned a debt rating of "bb plus" to trust preferred securities, which may be issued by Scottish Holdings Statutory Trust II and III and are special purpose vehicles. Additionally, A.M. Best has affirmed all existing debt ratings. The outlook for all the ratings is stable. The proceeds from the offering - which may include common shares/preferred shares - will be used to support growth in the company's core operating subsidiaries and for general corporate purposes.

Subsequent to any debt offerings under the shelf registration, Best said it does not expect Scottish Re's financial leverage to exceed 25 percent and said its current interest coverage is favourable at about seven times. Scottish Re's operating fundamentals and capitalisation are sound, said the report, enhanced by conservative investment management practices, improving earnings, strong growth in new reinsurance business and geographic diversification achieved primarily through its Windsor, England-based subsidiary, Scottish Re Ltd. Although Best said it views current capitalisation as strong, Scottish Re is experiencing rapid growth, having acquired 95 percent of ERC Life Reinsurance Corp., which doubled the group's life insurance in-force.

Accordingly, Best said it expects the risk-based capital ratios of Scottish Re's insurance subsidiaries to decline over the medium term and may require additional capital support from the parent.

"Moreover, A.M. Best believes Scottish Re may be challenged to achieve greater scale as it operates in the highly competitive life reinsurance marketplace where much larger, established players have significant competitive advantages," said the report.