Press Release - NOVEMBER 18, 2016

A.M. Best Affirms Credit Ratings of Atradius N.V.’s Main Operating Subsidiaries


CONTACTS:
 Nicola Gaisford
Senior Financial Analyst
+44 20 7397 0306
nicola.gaisford@ambest.com

Deniese Imoukhuede
Associate Director, Analytics
+44 20 7397 0277
deniese.imoukhuede@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

LONDON - NOVEMBER 18, 2016
A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” of the main operating subsidiaries of Atradius N.V. (Atradius) (Netherlands), the non-operating holding company of the Atradius group of companies: Atradius Credit Insurance N.V. (ACI) (Netherlands), Compañía Española de Seguros y Reaseguros de Crédito y Caución S.A.U. (CyC) (Spain), Atradius Reinsurance Designated Activity Company (ARe) (Ireland), Atradius Trade Credit Insurance, Inc. (ATCI) (US) and Atradius, Seguros de Crédito, S.A. (Atradius Mexico) (Mexico).

Concurrently, A.M. Best has affirmed the Long-Term Issue Credit Rating of “bbb-” of the EUR 250 million 5.25% subordinated fixed to floating rate guaranteed notes due 2044, issued by Atradius Finance, B.V. (Netherlands) and unconditionally and irrevocably guaranteed on a subordinated basis by Atradius. The outlook of these Credit Ratings (ratings) is stable.

The ratings of Atradius’ main operating entities reflect A.M. Best’s expectation that Atradius’ consolidated risk-adjusted capitalisation will be maintained at an excellent level, underpinned by the group’s strong earnings generation. The group’s financial leverage and interest coverage ratios are well within the tolerance levels for its ratings, and its balance sheet remains supported by a conservative investment and reserving strategy, as well as an effective reinsurance programme. Strong risk-adjusted capitalisation is maintained at each of the rated subsidiaries.

The Atradius group’s technical performance is strong, underpinned by a robust enterprise risk management framework, as well as the benefit of a better economic and hence trading environment in Spain (Spanish business represented roughly 23% of GWP in 2015). Additionally, Atradius’ earnings are supported by its geographically well-diversified insurance portfolio, resulting from the group’s excellent competitive position within the global trade credit insurance market. For the first nine months of 2016, Atradius’ operating profits decreased by 5.6% to EUR 149.9 million compared with the same period in 2015, owing to a rise in claims activity, due to the impact of the increased economic instability in some emerging markets. The group’s net combined ratio remains excellent at 75.4% (first nine months of 2015: 75.7%). Additionally, investment earnings reduced due to the low interest rate environment.

Some uncertainty exists with the sustainability of Atradius’ strong technical performance, as it progresses with its expansion plans. This reflects the highly competitive nature of trade credit insurance, together with the pressure that accumulating years of relatively low claims experience is putting on declining rates, and terms and conditions. Additionally, as with other credit insurers, the threat of a heightened insolvency environment, owing to the reduced level of economic activity in emerging nations, may generate volatility in technical results, due to the high correlation of the group’s earnings with fluctuations in the economic environment. Nonetheless, the group’s technical earnings are expected to be supported by management’s ability to take risk-mitigating actions on non-performing business when required.

As previously cited by A.M. Best, ACI is expected to be merged into CyC, with Atradius remaining as the Dutch intermediate parent of the newly restructured group. The transaction is expected to close at the end of 2016, subject to relevant regulatory approvals. The reorganisation is intended to reduce the complexity of Atradius’ corporate structure by consolidating the group’s two European insurance carriers, resulting in a legal entity that is subject to a single regulatory environment and governance framework. Atradius’ existing business strategy and financial position are expected to be unchanged, and current risk-adjusted capitalisation levels maintained at the group’s main rated operating entities are expected to remain excellent. A.M. Best will continue to monitor the financial position of the consolidated Atradius group after completion of the merger.

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.

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