AM Best Affirms Credit Ratings of Colonnade Insurance S.A.
11 December 2019 - 4:10AM
Business Wire
AM Best has affirmed the Financial Strength Rating of A-
(Excellent) and the Long-Term Issuer Credit Rating of “a-” of
Colonnade Insurance S.A. (Colonnade) (Luxembourg), a member of
Fairfax Financial Holdings Limited (Fairfax) [TSX: FFH] group of
companies. The outlook of these Credit Ratings (ratings) is stable.
The existing ratings of Fairfax and its other subsidiaries are
unchanged.
The ratings reflect Colonnade’s balance sheet strength, which AM
Best categorizes as strong, as well as its adequate operating
performance, neutral business profile and appropriate enterprise
risk management (ERM).
Colonnade’s balance sheet strength benefits from the explicit
and implicit support provided by Fairfax. This support includes a
track record of maintaining capital in the form of contributions
and a legally binding guarantee, investment management services and
ERM expertise. Fairfax’s commitment to Colonnade’s strong
risk-adjusted capital position was evident in multiple capital
contributions over its operating history, the most recent of which
was a EUR 10 million contribution made in 2019. Colonnade’s
risk-adjusted capitalization has been reliant on support from
Fairfax over the past few years. Going forward, AM Best expects
that the company will be able to support its business needs though
organic capital generation, as it implements growth plans and
continues to absorb startup costs.
Colonnade’s premium volume grew rapidly from 2016 through 2018,
its first three years under Fairfax ownership, as a result of the
rollover of books of business previously written by the operations
of QBE Insurance Group Limited and American International Group,
Inc. The risk associated with Colonnade’s premium growth in its
first few years of operation was moderated by Colonnade’s high
retention level of the management and staff that wrote the business
under the former owners. The pace of growth has moderated in 2019,
which is the first calendar year to reflect year-over-year
comparisons representing Colonnade’s complete underwriting
portfolio.
Colonnade’s adequate operating performance has been driven by
its favorable loss performance, which was offset by the initial
costs incurred in its developmental stage with expenses outpacing
premium. This performance was in line with the company’s business
plan and has steadily improved as start-up costs have subsided.
Colonnade generated a modest underwriting profit in 2018 and was on
pace to improve upon this result through the first nine months of
2019, due to continued improvement in loss and underwriting expense
ratios.
The company’s neutral business profile reflects its
concentration in the Central and Eastern European region, with the
three largest countries (Poland, Hungary and the Czech Republic)
representing about 75% of the premium written. Concentration risk
is offset by the dispersion of the remaining 25% of its business in
three other central European countries, and Colonnade’s diverse
product offering.
AM Best considers the company’s risk management capability to be
in-line generally with its risk profile, which is supported by its
focus on maintaining geographic and by-line diversity of its
business, conservative reserving and per risk reinsurance limits.
In 2018, the company reduced its 1-in-500 years all perils probable
maximum loss, which supported the improvement in the ERM assessment
to appropriate. The company also has enhanced its internal ERM
capabilities, with less reliance on parental support in this
area.
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. For
more information, visit www.ambest.com.
Copyright © 2019 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Gregory Dickerson Senior Financial Analyst +1
908 439 2200, ext. 5161 gregory.dickerson@ambest.com
Jennifer Marshall, CPCU, ARM Director +1 908
439 2200, ext. 5327 jennifer.marshall@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
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