A.M. Best Affirms Credit Ratings of Lancashire Holdings Limited and Its Subsidiaries
November 21 2017 - 4:09PM
Business Wire
A.M. Best has affirmed the Financial Strength Rating of A
(Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR)
of “a” of Lancashire Insurance Company Limited (Hamilton,
Bermuda) and Lancashire Insurance Company (UK) Limited
(United Kingdom) (collectively referred to as Lancashire).
Additionally, A.M. Best has affirmed the Long-Term ICR of “bbb” and
the Long-Term Issue Credit Ratings (Long-Term IR) of the parent
company, Lancashire Holdings Limited (Lancashire Holdings)
(Hamilton, Bermuda) [LSE: LRE]. The outlook for each of these
Credit Ratings (rating) remains stable. (See below for a detailed
listing of the Long-Term IRs)
The ratings reflect Lancashire’s very strong balance sheet,
strong operating performance, limited business profile and
appropriate enterprise risk management (ERM) for the group’s risk
profile.
Lancashire’s levels of risk-adjusted capitalization remain very
strong even under stress scenarios. Balance sheet strength is
further enhanced by the group’s financial flexibility and history
of consistent favorable reserve development, as well as its
relatively modest underwriting leverage. Financial leverage and
coverage metrics continue to be within tolerances for the group’s
rating level. Also reflected in the ratings are Lancashire’s
historically strong overall returns driven by excellent
underwriting results and complimented by investment income and, to
a lesser extent, fee income. The group’s five-year average return
on equity and combined ratio through year-end 2016 consistently
have placed Lancashire at the high end of its peer group,
particularly in non-catastrophe affected years. However, as
demonstrated by recent events, Lancashire maintains an elevated
risk profile and primarily writes lines of business that have
significant exposures to catastrophe activity.
A.M. Best’s view that Lancashire maintains a limited business
profile is largely a function of the group’s lines of business,
which generally are highly syndicated and have been under
substantial rate pressure for a number of years. This has
significantly limited the group’s potential for growth as it has
closely managed the cycle and maintained underwriting discipline.
Despite these challenges, Lancashire is a specialty underwriter
with a good degree of geographic and product line diversification
as the company’s offerings includes primary insurance, reinsurance
and retrocessional coverages on a global basis through traditional
capacity, Lloyd’s and its Kinesis platform.
In terms of ERM, Lancashire’s risk management function is
embedded and customized across the entire organization, which is
necessary given the group’s elevated risk profile. The group’s
historically strong underwriting results are demonstrative of the
group’s risk management capabilities.
The following Long-Term IRs have been affirmed with a stable
outlook:
Lancashire Holdings Limited—
— “bbb” on $130 million 5.7% senior unsecured notes, due 2022—
“bbb-” on $97 million 3.7% over LIBOR subordinated notes, due
2035
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.
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A.M. BestScott Mangan, +1 908-439-2200, ext.
5593Senior Financial
Analystscott.mangan@ambest.comorGreg Reisner, +1
908-439-2200, ext.
5224Directorgreg.reisner@ambest.comorChristopher
Sharkey, +1 908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy, +1
908-439-2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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