Bermuda-based Evergreen Reinsurance Company Ltd. has been affirmed the financial strength rating of A (excellent) and issuer credit rating of "a" by AM Best Co.

The outlook for both ratings is stable.

Best said that the ratings reflect Evergreen Re's adequate capitalisation, consistently strong operating performance and its unique role as the primary insurance carrier for its ultimate parent, Evergreen Group. These positive rating factors are derived from the company's conservative underwriting standards, low cost operating structure, multiple product line book of business and broad geographic exposure base, the ratings agency said.

But partially offsetting these positive rating factors is Evergreen Re's deteriorated risk-adjusted capitalisation over the past two years, said Best. The deterioration was due to higher investment risk and dividend payout out of $43 million.

Evergreen Re invested $65 million in the bonds issued by its affiliated company-EVA Airways Corporation. Given the relative short-term maturity of the bonds issued by EVA Airways, Best believes that Evergreen Re's Best's Capital Adequacy Ratio (BCAR) is supportive of the current ratings; however, any further deterioration in Evergreen Re's BCAR would create pressure on the stability of the company's ratings going forward.

Best said that the ratings also reflect the strong level of commitment on the part of Evergreen Group, whose management incorporates Evergreen Re as an integral component in the overall risk management program of the group. Moreover, Evergreen Re gains from its parent's global scope and business relationships.

These commitments have been developed over the last several years and encompass risks located in a number of countries in East and Southeast Asia, said the ratings agency. Overall, Evergreen Re benefits from its parent's strong management experience and market presence, as well as Evergreen Group's adherence to a philosophy of providing a stable market for global insurance and reinsurance for itself and its operating subsidiaries, Best said.