A.M. Best has removed from under review with negative
implications and affirmed the financial strength rating (FSR) of A
(Excellent) and the issuer credit ratings (ICR) of “a+” of the
ongoing property/casualty (P/C) subsidiaries of XL Group plc
(XL) (Ireland) [NYSE: XL], based on the recent announcement that XL
has closed on the acquisition of Catlin Group Limited.
Additionally, A.M. Best has withdrawn the ICR of “bbb” of Catlin
Group Limited. Concurrently, A.M. Best has removed from under
review with negative implications and affirmed the ICRs of “bbb+”
of XL and XLIT Ltd (Cayman Islands), as well as the debt
ratings of XLIT Ltd. The outlook assigned to all ICRs and debt
ratings is negative, while the outlook assigned to the FSR is
stable.
In addition, A.M. Best has removed from under review with
positive implications and affirmed the FSR of A (Excellent) and the
ICRs of “a” of Catlin Insurance Company Limited (CICL)
(Bermuda), the lead operating entity of the Catlin group of
companies, and its insurance subsidiaries. A.M. Best also has
removed from under review with positive implications and affirmed
the ICR of “bbb” of Catlin Underwriting (CU) (United
Kingdom), a non-operating holding company, as well as the debt
ratings of CU. The outlook assigned to the ICRs and debt ratings is
positive, while the outlook assigned to the FSR is stable. (See
below for a detailed listing of the companies and ratings.)
The FSR of A (Excellent) and the ICR of “a+” of Lloyd's
Syndicate 2003 (United Kingdom), which is managed by Catlin
Underwriting Agencies Limited, are unchanged. The outlook for both
ratings is positive. The syndicate’s ratings reflect the financial
strength of Lloyd's, which underpins the security of all
Lloyd's syndicates.
The assignment of a negative outlook to XL’s ICR ratings
reflects A.M. Best's concern associated with the complexity of an
acquisition of this size and scope. Furthermore, in order to
achieve the greatest efficiencies and long-term gains, a successful
integration must be achieved in a timely fashion. XL has made
progress in identifying and retaining key management teams but
still needs to integrate operations and systems infrastructure and
assimilate company cultures. There is execution risk while this
transition is taking place, which is partially mitigated by the
collaborative nature of this transaction. During the integration
period, A.M. Best also believes there is greater inherent risk to
the ongoing operations of the combined company.
The assignment of a positive outlook to the Catlin ratings
reflects the potential for the ratings to be raised to the level of
XL’s ongoing P/C subsidiaries. Additionally, it is anticipated that
Catlin’s insurance subsidiaries may benefit over time from scale
advantages accruing to the enlarged group, expense savings and
enhanced diversification. XL has undertaken detailed integration
planning, which should mitigate operational risks associated with
the acquisition. Changes to the ratings or an outlook revision will
be closely related to any movement in XL’s ratings.
Looking beyond the aforementioned risk factors, the proposed
transaction has favorable attributes, which include the combining
of two quality companies with solid management teams, global
capabilities and strong risk-adjusted capital positions. The
combined organization has greater scale, a broader product offering
and is expected to have increased influence in the market.
Factors that could lead to a rating downgrade include A.M.
Best's view that integration represents a potentially material risk
to the organization, an altered view of the organization’s
enterprise risk management capability, outsized investment or
catastrophe losses or a significant drop in risk-adjusted
capitalization. Factors that could lead to stabilization or an
upgrade of the ratings include a sound and streamlined integration
process, retention of key personnel, moderate debt and leverage
measures and solid operating results coupled with strong
risk-adjusted capitalization.
The FSR of A (Excellent) and the ICRs of “a+” have been removed
from under review with negative implications and affirmed, with the
FSR assigned a stable outlook and the ICRs assigned a negative
outlook, for the following subsidiaries of XL Group plc:
- XL Re Ltd
- Indian Harbor Insurance
Company
- Greenwich Insurance Company
- XL Insurance Company of New York,
Inc.
- XL Insurance America, Inc.
- XL Select Insurance Company
- XL Reinsurance America Inc.
- XL Specialty Insurance
Company
- XL Insurance (Bermuda) Ltd
- XL Re Latin America Ltd
- XL Insurance Company SE
- XL Re Europe SE
- XL Insurance Switzerland
Ltd
The FSR of A (Excellent) and the ICRs of “a” have been removed
from under review with positive implications and affirmed, with the
FSR assigned a stable outlook and the ICRs assigned a positive
outlook, for the following subsidiaries of Catlin Insurance
Company Limited:
- Catlin Indemnity Company
- Catlin Insurance Company (UK)
Ltd.
- Catlin Insurance Company
Inc
- Catlin Re Switzerland Ltd
- Catlin Specialty Insurance
Company
The following debt ratings been removed from under review with
negative implications, affirmed and assigned a negative
outlook:
XLIT Ltd.—
-- “bbb+” on $350 million 6.375% senior unsecured notes, due
2024
-- “bbb+” on $325 million 6.25% senior unsecured notes, due
2027
-- “bbb-” on $999.5 million 6.5% Series E non-cumulative
preferred securities, redeemable 2017
-- “bbb+” on $400 million 5.75% senior unsecured notes, due
2021
-- “bbb+” on $300 million 2.30% senior unsecured notes, due
2018
-- “bbb+” on $300 million 5.25% senior unsecured notes, due
2043
-- “bbb-” on $345 million Series D non-cumulative preferred
securities
The following debt ratings been assigned with a negative
outlook:
XLIT Ltd.—
-- “bbb” on $500 million 4.45% subordinated notes, due 2025
-- “bbb” on $500 million 5.5% subordinated notes, due 2045
The following indicative ratings on shelf securities have been
removed from under review with negative implications, affirmed and
assigned a negative outlook:
XLIT Ltd.—
-- “bbb+” on senior unsecured debt
-- “bbb” on subordinated debt
-- “bbb-” on preferred stock
The following debt ratings been removed from under review with
positive implications, affirmed and assigned a positive
outlook:
Catlin Insurance Company Limited—
--“bbb” on USD 600 million 7.249% preferred stock
Catlin Underwriting—
-- “bbb-” on USD 27 million subordinated floating rate notes,
due 2036
-- “bbb-” on EUR 7 million subordinated floating rate notes, due
2035
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
www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Analyzing Insurance Holding Company
Liquidity
- Catastrophe Analysis in A.M. Best
Ratings
- Equity Credit for Hybrid
Securities
- Insurance Holding Company and Debt
Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process
for Insurance Companies
- Understanding BCAR for
Property/Casualty Insurers
- Understanding Universal BCAR
This press release relates to rating(s) 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 visit A.M.
Best’s Ratings & Criteria Center.
A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2015 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
A.M. Best Company, Inc.Greg ReisnerManaging
Senior Financial Analyst(908) 439-2200, ext.
5224greg.reisner@ambest.comorAnthony
SilvermanSenior Financial Analyst+(44) 20 7397
0264anthony.silverman@ambest.comorChristopher
SharkeyManager, Public Relations(908) 439-2200, ext.
5159christopher.sharkey@ambest.comorJim
PeavyAssistant Vice President, Public Relations(908)
439-2200, ext. 5644james.peavy@ambest.com
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