A.M. Best Assigns Ratings to Chartis Europe Limited and Chartis Europe S.A.

LONDON--(BUSINESS WIRE)--A.M. Best Europe – Rating Services Limited has assigned a financial strength rating of A (Excellent) and issuer credit ratings of “a” to Chartis Europe Limited (United Kingdom) and Chartis Europe S.A. (France). The outlook assigned to all ratings is stable.

“A.M. Best’s Ratings & the Treatment of Debt”

The ratings reflect the excellent risk-adjusted capitalisation of both Chartis Europe Limited and Chartis Europe S.A. and the companies’ good business profile, which is supported by excellent distribution capabilities across Europe. Concerns regarding weaker underwriting results in recent years and the impact of the economic downturn on prospective results are partly mitigated by the actions management has taken to address the underperformance of particular lines of business.

By the end of 2012, Chartis Europe S.A. is expected to have merged into Chartis Europe Limited. This will substantially complete the Chartis group’s restructuring of its European operations and will align more closely its legal entity and management structures in Europe. The risk-adjusted capitalisation of Chartis Europe Limited is expected to remain supportive of its ratings following the merger.

For 2011, a modest improvement in combined technical performance is expected, with higher catastrophe losses offset by better results for casualty, specialty, financial lines and consumer business. A further improvement is expected in 2012, supported by corrective actions taken to address weaker performance in recent years, including the withdrawal from unprofitable lines of business, the introduction of revised underwriting guidelines and the refocus of the professional indemnity account away from recession exposed professions.

However, prospective performance is subject to considerable uncertainty. Rates remain weak for many of the companies’ core lines of business. In addition, results are particularly susceptible to the effects of a prolonged economic downturn due to the relatively high proportion of casualty and financial lines business underwritten. Results between 2008 and 2010 were adversely affected by financial crisis related losses, a series of large property losses due to catastrophes and severe winter weather in the United Kingdom and Ireland, as well as the weak performance of the now discontinued UK motor account.

The Chartis European entities have a good business profile in the commercial insurance market, with a particularly strong competitive position in the aerospace, marine, energy and financial lines markets. In addition, both companies are significant writers of multinational programmes. Their competitive position is enhanced by excellent distribution capabilities and the ability to offer a broad range of products across a wide geographic area. Following the reorganisation of the Chartis group’s management structure in 2011, the European operations are expected to become better integrated with those of the wider group, and both companies are expected to benefit from group-driven initiatives to improve performance and analytical capabilities.

A.M. Best does not expect positive rating actions in the near future. Factors that may lead to negative rating actions include a decline in risk-adjusted capitalisation, weaker than expected operating performance or deterioration in reserves. Factors affecting other subsidiaries of the Chartis group or its ultimate parent, American International Group, Inc, could place downwards pressure on the ratings of Chartis Europe Limited and Chartis Europe S.A.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilised include: “Rating Members of Insurance Groups”; “Risk Management and the Rating Process for Insurance Companies”; “Catastrophe Analysis in A.M. Best Ratings”; “A.M. Best’s Ratings & the Treatment of Debt”; “Understanding BCAR for Property/Casualty Insurers”; and “Understanding Universal BCAR”. Methodologies can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.