A.M. Best Upgrades Issuer Credit Ratings of Transatlantic Holdings Inc. and
OLDWICK, N.J. -- February 28, 2013
A.M. Best Co. has upgraded the issuer credit ratings (ICR) to “a+” from “a”
and affirmed the financial strength rating (FSR) of A (Excellent) of
Transatlantic Reinsurance Company (TransRe), Fair American Insurance and
Reinsurance Company (both domiciled in New York, NY) and Trans Re Zurich
Reinsurance Company Ltd. (Switzerland). The outlook for the FSR is stable,
while the outlook for the ICR has been revised to stable from positive.
In addition, A.M. Best has upgraded the ICR to “bbb+” from “bbb” and the debt
ratings of Transatlantic Holdings Inc. (Transatlantic Holdings). The outlook
for these ratings has been revised to stable from positive.
Concurrently, A.M. Best has revised the outlook to positive from stable and
affirmed the FSR of A (Excellent) and ICRs of "a+" of RSUI Indemnity Company
and its reinsured subsidiaries, collectively referred to as RSUI Group (RSUI)
(headquartered in Atlanta, GA).
A.M. Best also has affirmed the ICR of "bbb+" and debt ratings of "bbb+" of
Alleghany Corporation (Alleghany) (headquartered in New York, NY) (NYSE: Y).
The outlook for these ratings are stable.
Additionally, A.M. Best has revised the ICRs outlook to stable from positive
and affirmed the FSR of A (Excellent) and ICRs of "a" of Capitol Indemnity
Corporation, its subsidiary and an affiliate, which operate under a pooling
agreement, collectively referred to as Capitol Insurance Group (Capitol)
(headquartered in Middleton, WI). The outlook for the FSR is stable.
At the same time, A.M. Best has revised the FSR outlook to positive from
stable, the ICR outlook to positive from negative and affirmed the FSR of B++
(Good) and ICR of "bbb+" of Pacific Compensation Insurance Company (Pacific
Comp) (headquartered in Agoura Hills, CA). The revised outlook is based on the
potential for further explicit support through intercompany reinsurance to
Pacific Comp. (See below for a detailed listing of the companies and ratings.)
The ICR upgrades for TransRe recognize the successful completion of the merger
with Alleghany and A.M. Best’s expectation that being part of Alleghany will
enable TransRe to focus on underwriting opportunities and further enhance its
excellent market profile.
The company continues to maintain strong capitalization and consistent
operating results stemming from its casualty orientation. Operating results
have been further complemented by strong investment income.
Transatlantic Holdings’ debt-to-capital ratio remains within the acceptable
range for its ratings, while fixed charge coverage rebounded in 2012 to 5.0
times and is expected to be maintained in the near term.
Partially offsetting these positive attributes is A.M. Best’s concern
regarding the current soft pricing conditions in the casualty market from
which TransRe derives a substantial portion of its premiums. A.M. Best’s
concern regarding pre 2001 reserve adequacy have been markedly reduced as the
level of these reserves have declined relative to the company’s total reserve
Potential upward movement on the ratings of TransRe could result from
continued consistent operating performance and sustained strong risk-adjusted
capitalization. Negative rating actions could occur if TransRe incurs an
outsized catastrophic or investment loss relative to its peer group or if its
operating performance consistently falls below the market resulting in erosion
of its capital base and a decline in its risk-based capitalization.
The ratings and revised outlook of RSUI reflect its continued strong
capitalization, excellent historical underwriting profitability and the
benefits it derives from being part of Alleghany. Partially offsetting these
positive rating factors is RSUI's dependence on reinsurance and exposure to
weather-related losses as evidenced by the losses from Superstorm Sandy.
Potential upward movement in the ratings of RSUI could result from continued
superior underwriting results and maintaining a strong risk-adjusted capital
position. Downward movement in the ratings could result from a material
decline in the organization's capitalization, negative trends in claim
frequency or severity that could materially impair underwriting results, as
well as a significant decline in equity capital markets and its impact on
RSUI's investment portfolio and capitalization.
The ratings of Capitol acknowledge its strong level of capitalization,
historically solid underwriting performance and long-standing agency
relationships. The revised ICR outlook reflects recent underwriting losses
mostly the result of adverse loss reserve development relating to a
Potential upward movement in the ratings or another revised outlook for
Capitol could result from an improvement in its underwriting results back to
historical levels and maintaining a strong risk-adjusted capital position.
Downward movement in the ratings could result from a material decline in the
organization's capitalization, negative trends in claim frequency or severity
that could materially impair underwriting results, a significant decline in
equity capital markets and its impact on Capitol’s investment portfolio and
The ratings of Pacific Comp acknowledge its supportive capitalization, which
has benefited from $105 million in capital contributions from Alleghany since
2007. In 2009, Pacific Comp ceased soliciting new or renewal business on a
direct basis in California as management determined that it was unable to
write business at rates deemed adequate. Pacific Comp now operates as a broker
carrier and began writing new business in 2011 in the California workers’
compensation market as conditions improved. The revised outlook reflects the
demonstrated support from Alleghany in the form of capital contributions and
the potential for additional explicit support through intercompany reinsurance
agreements that would protect the balance sheet from adverse loss reserve
development and its income statement from unexpected losses on current
Potential upward movement in Pacific Comp’s ratings could result from the
finalization and implementation of the proposed reinsurance support from
Alleghany and improved operating performance. Downward movement in the ratings
could result from a decline in the organization's capitalization to levels not
supportive of its ratings, continued poor underwriting results and an
indication of non-support from Alleghany.
As of December 31, 2012, Alleghany had $6.4 billion in GAAP equity, $18.3
billion of investments and a total debt-to-capital ratio of 22.7%.
Furthermore, Alleghany also maintains substantial financial flexibility,
having roughly $732 million of marketable securities and cash on its balance
sheet that is comprised of $464 million at the parent company, $90 million at
Alleghany Insurance Holdings LLC (AIHL) and $178 million at Transatlantic
Holdings. AIHL is the intermediate holding company that owns all of
Alleghany's wholly owned operating insurance subsidiaries, outside of
The FSR of A (Excellent) and ICRs of "a" have been affirmed for the following
members of Capitol Insurance Group:
*Capitol Indemnity Corporation
*Platte River Insurance Company
*Capitol Specialty Insurance Corporation
The FSR of A (Excellent) and ICRs of "a+" have been affirmed for the following
members of RSUI Group:
*RSUI Indemnity Company
*Landmark American Insurance Company
*Covington Specialty Insurance Company
The following debt rating has been affirmed:
-- "bbb+" on $299 million 5.625% senior unsecured notes, due 2020
The following debt rating has been assigned:
-- "bbb+" to $400 million 4.95% senior unsecured notes, due 2022
The following indicative ratings available under the shelf registration have
-- "bbb+" on senior unsecured debt
The following debt ratings have been upgraded:
Transatlantic Holdings Inc. —
-- to “bbb+”from “bbb” on $667 million 5.75% senior unsecured notes, due 2015
-- to “bbb+” from “bbb” on $350 million 8% senior unsecured notes, due 2039
The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Best’s Credit Rating Methodology can be found at
Founded in 1899, A.M. Best Company is the world’s oldest and most
authoritative insurance rating and information source. For more information,
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
A.M. Best Co.
Rick Barracato, 908-439-2200, ext. 5422
Senior Financial Analyst
Peter Dickey, 908-439-2200, ext. 5053
Assistant Vice President
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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