Company Website:
http://www.ambest.com
OLDWICK, N.J. -- (Business Wire)
A.M. Best has assigned a Financial Strength Rating (FSR) of A-
(Excellent) and a Long-Term Issuer Credit Rating (Long-Term ICR) of “a-”
to Colonnade Insurance S.A. (Colonnade) (Luxembourg), a member of Fairfax
Financial Holdings Limited (Fairfax) (Toronto, Canada) [TSX: FFH]
group of companies. Additionally, A.M. Best has assigned indicative
Long-Term Issue Credit Ratings (Long-Term IR) of “bbb” to senior
unsecured debt, “bbb-” to subordinated debt and “bb+” to preferred stock
of the recently filed short-form base shelf prospectus (base shelf
prospectus) of Fairfax. The outlook assigned to these Credit Ratings
(ratings) is stable. The existing ratings of Fairfax and its
subsidiaries are unchanged. The assigned ratings, for securities that
may be issued under the shelf registration statement, are consistent
with the current ratings of Fairfax’s outstanding securities. The new
base shelf prospectus replaces Fairfax’s previous shelf registration,
which expired Oct. 19, 2017. Consequently, the indicative Long-Term IRs
for the previous shelf registration have been withdrawn. The company’s
financial leverage and coverage ratios are within A.M. Best’s guidelines
for Fairfax’s current ratings and are expected to remain so over the
near term.
The ratings of Colonnade reflect the overall strength of its balance
sheet, supported by its ultimate parent Fairfax, favorable loss
performance, the expected improvement in overall operating performance
and adequate business profile. Colonnade benefits from explicit and
implicit support provided by its ultimate parent, Fairfax, including a
legally binding guarantee, track record of capital support, technical
reserving support, investment management services and enterprise risk
management (ERM) expertise. Key offsetting rating factors are
Colonnade’s current operating performance, which is reflective of its
elevated expense ratio, and marginal ERM.
Colonnade’s adequate balance sheet strength is supported by its strong
risk-adjusted capitalization. A.M. Best expects Colonnade’s
risk-adjusted capitalization to remain reliant on support from Fairfax
over the next few years as it implements its growth plans and absorbs
startup costs. Colonnade's premium volume has grown rapidly since 2015,
accelerating in 2017, as a result of the rollover of books of business
acquired from QBE and AIG. The risk associated with Colonnade's premium
growth is moderated by the retention of a high proportion of management,
staff and business.
Colonnade’s adequate operating performance is driven by its favorable
loss performance, which is offset by the initial costs incurred in its
developmental stage with expenses outpacing premium by a sizable margin.
The company’s adequate business profile reflects its concentration in
the Central and Eastern European region, with the two largest countries
(the Czech Republic and Poland) representing about 40% of the premium
written. Concentration risk is somewhat offset by the dispersion of the
remaining 60% of the business in four other central European countries,
and the product offering, with personal and commercial business
representing 40% and 60% respectively.
A.M. Best considers the company’s risk management capability to be
generally in-line with its risk profile, which is supported by its focus
on maintaining geographic and by line diversity of its business,
conservative reserving and per risk reinsurance limits. However, the
company maintains an outsized 1-in-500 years all perils probable maximum
loss which, if incurred, would result in a sharp deterioration of
risk-adjusted capital levels. While the current guarantee from Fairfax
would cover Colonnade’s liabilities in that scenario, the company’s risk
appetite and current reinsurance structure do not support an overall
adequate ERM assessment.
This press release relates to Credit Ratings that have been published
on A.M. Best’s website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and A.M. Best press releases, please view Guide
for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating
Action Press Releases.
A.M. Best is the world’s oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its
subsidiaries. ALL RIGHTS RESERVED.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171114006494/en/
Contacts:
A.M. Best
Darian Ryan, CPA
Senior Financial Analyst
+1
908 439 2200, ext. 5449
darian.ryan@ambest.com
or
Jennifer
Marshall, CPCU, ARM
Director
+1 908 439 2200, ext. 5327
jennifer.marshall@ambest.com
or
Christopher
Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
or
Jim
Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com
Source: A.M. Best
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