Ascot Bermuda and US ratings upgraded by AM Best
AM Best has upgraded the Long-Term Issuer Credit Ratings to “a+” (Excellent) from “a” (Excellent) and affirmed the Financial Strength Rating of A (Excellent) of Ascot Bermuda Limited, as well as Ascot Insurance Company and Ascot Specialty Insurance Company, both of which are in New York and collectively referred to as Ascot Insurance US Group.
The outlook of the Long-Term ICRs has been revised to stable from positive, whilst the outlook of the FSR is stable.
AM Best also has upgraded the Long-Term Issue Credit Rating (Long-Term IR) to “bbb+” (Good) from “bbb” (Good) of the $400 million, 4.25 per cent fixed rate senior unsecured notes due 2030, issued by Ascot Group Limited. The outlook of the Long-Term IR has been revised to stable from positive.
The upgrade of the Long-Term ICRs reflects the group’s improved geographical and product diversification, achieved through its Bermudian operations and US operations.
The Credit Ratings of Ascot Bermuda and Ascot US reflect the consolidated balance sheet strength of Ascot Group Limited, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Additionally, Ascot receives rating enhancement from its parent, Canada Pension Plan Investment Board (CPPIB), considered to be of superior financial strength and supportive of Ascot’s strategy.
Ascot Bermuda is viewed to be strategically important to Ascot as a platform for growth in the Bermudian reinsurance market, and as an internal reinsurer. Ascot US is viewed as strategically important for the group as a source for diversification and growth within the US-admitted lines market, and is supported by a net worth maintenance agreement with Ascot. Both divisions are integrated fully within the group’s operations and management.
Ascot is a property and specialty (re)insurance group, with 2020 gross written premium of $1,819 million.
Previously, the group’s business was underwritten primarily via Lloyd’s Syndicate 1414 (Syndicate 1414), which is managed by Ascot Underwriting Limited.
However, Bermudian and US operations now contribute a sizeable portion of the group’s revenue.
Ascot Bermuda started underwriting in 2018 and grew to GWP $522 million in 2020. Ascot US started underwriting in May 2019 and reported $254 million of GWP in 2020, its first full year of operation.
Ascot US and Ascot Bermuda increasingly provide diversification to the group’s underwriting portfolio, which has historically had concentration to US property risks. However, expansion remains subject to a moderate execution risk. Ascot has a stable and experienced management team that has been strengthened appropriately as its business has grown.
The group’s balance sheet strength is underpinned by its risk-adjusted capitalisation that AM Best expects to be maintained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by prudent capital management.
The balance sheet strength assessment benefits from the excellent financial flexibility offered by CPPIB.
Since acquiring Ascot Underwriting Holdings Ltd. in 2016, CPPIB has made several capital injections to support the group’s growth, demonstrating its ongoing commitment.
Ascot has a track record of robust underwriting performance, evidenced by Syndicate 1414’s five-year weighted average combined ratio of 95.7 per cent over the period 2016-2020, which was approximately 15 percentage points below the same metric for the overall Lloyd’s market.
In 2020, Ascot reported $150 million of profit, compared with $80 million in 2019.
AM Best expects profitability to improve gradually over the medium term, as its US and Bermudian operations grow and mature.