Best’s News & Research Service - December 12, 2019 11:43 AM (EST)
AM Best Affirms Credit Ratings of XL Bermuda Ltd and Its Main P/C Subs; Withdraws Credit Ratings of XLIT Ltd. and XL Group Ltd
- December 12, 2019 11:43 AM (EST)
Oldwick //BestWire// - AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa-” of XL Bermuda Ltd (Bermuda) and its property/casualty subsidiaries (collectively referred to as XL). Concurrently, AM Best has affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb+” of XL Life Ltd (Bermuda). In addition, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of T.H.E. Insurance Company (New Orleans, LA). The outlook of these Credit Ratings (ratings) remains stable.
AM Best also has affirmed the Long-Term ICR of “a-” and the Long-Term Issue Credit Ratings (Long-Term IR) of XLIT Ltd. (Cayman Islands), as well as the Long-Term ICR of “a-” of XL Group Ltd (Bermuda). The outlook of these ratings is stable. Concurrently, these ratings have been withdrawn at the company’s request. Additionally, AM Best has withdrawn the Long-Term IR of “a-” on the preference share issues of Catlin Insurance Company Ltd. (Bermuda), as they were redeemed by AXA XL.
The ratings of XL reflect the organization’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM). The ratings also reflect XL’s strategic importance to, and alignment with AXA S.A. (AXA or AXA group), which enhances XL’s position in the global commercial property/casualty (P/C) insurance sector.
This alignment supports the published ratings that receive rating enhancement. XL is considered well-integrated within the AXA group, and AM Best expects that prompt and sufficient operational and financial support will be made available from the AXA group to XL, should it be required.
XL’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is categorized as very strong and AM Best expects it to remain at a similar level going forward. The balance sheet strength assessment also considers XL’s good liquidity profile, conservative investment strategy and disciplined reserving approach.
XL’s operating earnings have been volatile historically and below expectations over the past five years partially due to the natural catastrophe losses of 2017 and 2018, which pulled the return-on-equity level into negative territory for both years. Although AXA XL (the division of AXA which includes XL) reported a combined ratio of 98.3% as of June 30, 2019, AM Best expects these results to deteriorate due to the company’s exposure to catastrophic events during the second half of the year. Prospectively, earnings are expected to demonstrate more stability supportive of the AXA group’s operating targets.
XL maintains a favorable business profile due to its extensive distribution network, strong franchise and well-diversified book of business by both product type and geography. The alignment with the AXA group allows a wider reach in the global markets for XL’s products. The company continues to operate in challenging competitive conditions that consistently drive negative pressure on pricing. AM Best expects that XL’s performance will become more aligned with peers as price continues to improve in the primary and reinsurance markets. AM Best views XL’s risk management capabilities as being appropriately aligned with its risk profile.
XL has also deleveraged its balance sheet by redeeming all of the outstanding preferred shares and a portion of its senior debt. The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” have been affirmed, with stable outlooks for XL Bermuda Ltd and the following property/casualty subsidiaries:
- AXA Insurance Company
- Catlin Indemnity Company
- Catlin Insurance Company Ltd.
- Catlin Insurance Company, Inc.
- Catlin Re Switzerland Ltd
- Catlin Specialty Insurance Company
- Greenwich Insurance Company
- Indian Harbor Insurance Company
- XL Catlin Insurance Company UK Limited
- XL Insurance America, Inc.
- XL Insurance Company SE
- XL Insurance Company of New York, Inc.
- XL Insurance Switzerland Ltd
- XL Re Europe SE
- XL Reinsurance America Inc.
- XL Seguros Mexico, S.A. de C.V.
- XL Select Insurance Company
- XL Specialty Insurance Company
The following Long-Term IRs have been withdrawn as they have been redeemed:
XLIT Ltd.—
— “a-” on $400 million 5.75% senior unsecured notes, due 2021
— “a-” on $350 million 6.375% senior unsecured notes, due 2024
— “a-” on $325 million 6.25% senior unsecured notes, due 2027
— “bbb” from on $350 million Series D non-cumulative preferred securities ($287 million outstanding)
— “bbb” on $1,000 million Series E non-cumulative preferred securities ($670 million outstanding)
Catlin Insurance Company Ltd. —
— “a-” on $600 million non-cumulative preferred stock ($553 million outstanding)
The following Long-Term IRs have been affirmed with stable outlooks and withdrawn at the company’s request:
XLIT Ltd. —
— “a-” on $300 million 5.25% senior unsecured notes, due 2043
— “bbb+” on $500 million 4.45% subordinated notes, due 2025
— “bbb+” on $500 million 5.5% subordinated notes, due 2045
This press release relates to Credit Ratings that have been published on AM 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 AM 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 AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data provider specializing in the insurance industry. The company does business in more than 100 countries. Headquartered in Oldwick, NJ, AM Best has offices in cities around the world, including London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.