A.M. Best Downgrades Ratings of Atradius Trade Credit Insurance, Inc and Subsidiary; Revises Outlook to Negative

OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and issuer credit ratings to “a-” from “a” of Atradius Trade Credit Insurance, Inc. (ATCI) (Baltimore, MD) and its wholly owned and 100% reinsured subsidiary, Atradius Trade Credit Insurance Company, New Jersey (ATCI-NJ) (West Trenton, NJ). The outlook has been revised to negative from stable.

The rating actions reflect the adverse effects of the credit crisis, including materially weakened operating results and the substantial drop in ATCI’s still strong risk-adjusted capitalization, driven by high frequency of losses, reduced premiums, adverse development and lower ceding commissions.

The rating actions also reflect the material dependence of ATCI on its group, which continues to face challenges due to the global economic crisis. The group is comprised of owner Grupo Catalana Occidente S.A. (GCO) (Spain), Grupo Compania Espanola Credito Y Caucion, S.L. (Grupo CYC) (Spain), Atradius N.V. (Netherlands) and affiliates.

In addition, the credit insurance industry is highly correlated to bankruptcies and default rates, whereby ATCI’s volatility of operating results in this credit crisis has been only partially mitigated by ATCI’s risk management and high utilization of reinsurance (77.5% ceded).

Positive ratings factors include management’s dynamic risk reduction efforts, which considerably reduced total potential exposure; leading market position in the trade credit industry; still strong risk-adjusted capitalization; strong pre-crisis operating profitability; and financial flexibility provided by the group.

The revised outlook reflects A.M. Best’s concern of the continued pressure on underwriting profitability and surplus related to the constraining effects of a potentially protracted recession.

ATCI is a wholly owned subsidiary of Atradius N.V., of which 64% is owned by Grupo CYC, which is 70% owned by GCO.

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.