OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A+ (Superior) and the issuer credit rating of “aa-” of Euler Hermes North America Insurance Company (Euler Hermes NA) (Owings Mills, MD). The outlook for both ratings is stable.
The ratings reflect Euler Hermes NA’s leading market position as a large trade accounts receivable insurer in the United States, historically profitable operating performance and strong risk-adjusted capital position. Furthermore, the ratings take into consideration the support provided by Euler Hermes NA’s intermediate parent, Euler Hermes S.A. (France), and the organization’s ultimate parent, Allianz Societas Europaea (Allianz SE) (Germany). This support includes reinsurance protection, financial flexibility, infrastructure and marketing capabilities.
These positive rating factors are partially offset by the downturn in Euler Hermes NA’s operating results during the last financial crisis, which caused an increased loss frequency as a result of a rise in bankruptcies and default rates, as well as the impact of reserve development occurring in several accident years. Additionally, growth in policyholders’ surplus has been constrained given the level of stockholder dividends paid during the five-year period. Despite the downturn in results, additional volatility was mitigated by effective risk management practices.
Future positive rating actions may result if Euler Hermes NA outperforms its peers over an extended period of time. However, negative rating actions could result if the company experiences a considerable decline in risk-adjusted capitalization. Operating performance that falls below expectations or a reduction in Euler Hermes NA’s strategic importance to Allianz SE could also cause negative rating pressure.
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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