LONDON--(BUSINESS WIRE)--A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Builders Reinsurance S.A. (BRe) (Luxembourg), a subsidiary of Hochtief AG, a large Germany-based construction company. The outlook for both ratings remains stable.
The ratings of BRe reflect its strong risk-adjusted capitalisation, solid--albeit volatile--financial performance, as well as its continuously improving risk management framework.
BRe’s risk-adjusted capitalisation is expected to remain strong and supportive of its ratings, despite the anticipated repatriation of capital to Hochtief AG in the amount of USD 160 million between 2012 and 2016. However, the reduction in capital is partially compensated by solid retained earnings, which are transferred to equalisation reserves.
BRe’s operating results for 2013 are expected to surpass the sound pre-tax profit of USD 24.7 million reported in 2012. It is expected that BRe will return to a stable loss ratio of approximately 60% in 2013, after reporting a relatively higher frequency of claims in its main lines of business. In addition, a sound investment result is expected to be achieved in 2013 due to the performance of BRe’s specialized investment funds (SIFs), with net investment gains of about USD 6 million as of third quarter 2013.
BRe continues to develop a formalised corporate governance structure aimed at improving risk management processes. The company is further enhancing its internal control systems including its compliance framework.
Positive rating actions are unlikely at this time. A negative trend in BRe’s underwriting profitability or a material decline in its risk-adjusted capitalisation would put negative pressure on the ratings.
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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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