Best’s News & Research Service - June 04, 2012 12:15 PM (EDT)
A.M. Best Affirms Ratings of Optimum Reassurance Inc. and Optimum Re Insurance Company
OLDWICK, N.J. //BestWire// - A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit ratings of "a-" of Optimum Reassurance Inc. (Montreal, Quebec) and its affiliate, Optimum Re Insurance Company (Dallas, TX) (collectively known as Optimum Re). The outlook for all ratings is stable.
The rating actions reflect Optimum Re’s proven ability to grow net premiums and earnings while maintaining a solid capital and surplus position. The ratings also reflect Optimum Re's ability to maintain a stable niche market position as a well regarded North American life reinsurer. In addition, Optimum Re's risk management strategies were proven to be effective in recent years compared against a number of larger direct life writers and life reinsurers, most notably in its conservative investment management practices. Nevertheless, Optimum Re is small in absolute terms, and the ratings reflect the operating constraints imposed by the organization's scale.
Optimum Re has developed certain niches such as out-of-country medical in Canada while serving small to larger life insurers in the individual and group segments in Canada and the United States. The company continues to focus on expanding its market base, offering solutions for group life accident and sickness products in the Mexican and Caribbean markets. A.M. Best believes that Optimum Re’s ability to deliver value-added products to the Canadian, U.S. and Caribbean reinsurance marketplace will enable the company to continue its growth strategy.
While generally paying dividends to its common shareholders, Optimum Re has historically maintained a strong risk-adjusted capital position by retroceding out a sizable portion of its assumed insurance risk utilizing, in many instances, well established retrocessionaires. In the United States, Optimum Re has been reimbursing its parent for past explicit capital support. As Optimum Re Insurance Company pays down its surplus note obligations, risk-based capital is expected to be tempered relative to levels experienced in recent years.
A.M. Best believes Optimum Re is well positioned at its current rating level for the foreseeable future. Factors that could result in negative rating actions include a significant decline in risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR) model or a sustained deterioration in operating performance.
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. Key criteria utilized include “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.