AM Best has affirmed the financial strength rating of A (Excellent) and issuer credit rating (ICR) of “a” of Catlin Insurance Company Limited (CICL) (Bermuda) and its subsidiary Catlin Insurance Company (UK) Ltd (Catlin UK). At the same time, AM Best has affirmed the ICR of “bbb” of Catlin Group Limited (CGL) (Bermuda), CICL's ultimate parent company. The outlook for all ratings remains stable.
AM Best anticipates that CICL's consolidated risk-adjusted capitalisation will remain excellent at year-end 2005. The company is expected to continue to generate additional capital internally, increasing consolidated capital and surplus to over $1bn by year-end 2005 (up from $891m at year-end 2004). This increase in capital will be sufficient to offset anticipated growth in gross premiums of approximately 50% to over $650m during the same period.
At year-end 2004, in support of CGL's underwriting at Lloyd's through Lloyd's Syndicate 2003, CICL had assets in trust of $237m and guaranteed a letter of credit for $225m. AM Best has excluded the assets in trust and total value of the letter of credit from its risk-adjusted analysis of CICL's capitalisation.
AM Best believes that CICL's technical performance is likely to remain excellent in 2005 and 2006. Despite exceptionally high hurricane activity in 2004, which contributed $18.8m to CICL's net incurred losses and 5.7% to the loss ratio, the company achieved a combined ratio of 78.6% for the year. AM Best anticipates that the company's operating expense ratio is likely to remain competitive in 2005 and 2006 at marginally over 20%, although increasing from 18.8% in 2004 as the company builds resources in Bermuda and London. The combined ratio is forecast to stay below 80% for both years, assuming a return to normal loss experience.
