OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Aurigen Reinsurance Company (Toronto, ON) and Aurigen Reinsurance Limited (Hamilton, Bermuda) (collectively known as Aurigen). The outlook for the ratings is stable.
The ratings of Aurigen are based upon its excellent risk-adjusted capital position and modest consolidated earnings. While the company is still considered in its early stage of operating history, it is focused on the Canadian life reinsurance marketplace with plans to expand into the United States market.
During the past year, Aurigen was able to grow its revenues, maintain a robust capital position, continue to prudently gain traction in a concentrated market, and now has reinsurance treaties in place with the largest accounts in Canada. A.M. Best views Aurigen’s business plan as opportunistic and believes it may be difficult for Aurigen to grow its market share quickly in the established and concentrated Canadian market.
A.M. Best maintains the position that continued uncertainties exist with respect to the successful longer term execution of Aurigen’s business plan, but these uncertainties have lessened over the past year, reflecting a successful embedded value securitization demonstrating additional financial flexibility and new business volume. While the company’s new business activities during the early years of its operation were below A.M. Best’s expectations based on Aurigen’s original business plan, A.M. Best believes that the company has recently demonstrated consistent new business growth and strong capital to achieve its current objectives. If growth plans outpace the company’s business plan, Aurigen may potentially need to reach out to the capital markets in some way to facilitate growth objectives through an initial public offering, or possibly some other method, to raise capital.
A positive rating action is unlikely over the near to medium term. A negative rating action could result if the planned growth strategies result in material negative changes in the company’s capitalization, operating performance, or unexpected negative changes in Aurigen’s business model develop.
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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