Best Ratings Report

Editor's note: This information is courtesy of A.M. Best Co.
For further information, visit www.ambest.com/ratings.


A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of Citi Assurance Services Group’s (CAS) two life/health member companies, American Health and Life Insurance Company and its subsidiary, Sears Life Insurance Company (collectively referred to as AHL). A.M. Best also has affirmed the FSR of A (Excellent) and ICR of “a” of CAS’ property/casualty member, Triton Insurance Company (Triton). The Texas-domiciled companies are indirect subsidiaries of Citigroup, Inc. (Delaware) [NYSE: C], one of the world’s largest financial services company with consolidated assets of approximately $2.2 trillion as of Dec. 31, 2007.

The ratings of AHL are based upon its consistent earnings, favorable balance sheet quality and liquidity and strong risk-adjusted capitalization. The ratings also acknowledge the competitive advantage derived from the sale of its core credit life and credit disability products through its parent, CitiFinancial Credit Company (CCC). CCC is an indirect, wholly owned subsidiary of Citigroup, Inc., and one of the leading consumer finance institutions with a network of branch offices throughout the United States and Canada. A.M. Best believes AHL’s activities, which are principally conducted through the consumer finance operations of CCC, will continue to provide AHL with a more stable source of premium income relative to many of its competitors.

Partially offsetting these strengths is AHL’s operational concentration in credit insurance products, the challenges inherent in the credit insurance market and the high dividend requirements of Citigroup, Inc.

Triton’s ratings reflect its supportive level of risk-adjusted capitalization, strong operating performance and the advantages it receives as a subsidiary of CCC and as a member of the Citigroup enterprise. These positive rating factors are reflective of management’s expertise in consumer finance oriented products and Triton’s conservative operating leverage.

These positive rating factors are partially offset by Triton’s concentration in the traditionally challenging credit insurance market, its distribution dependence on CCC and the impact on Triton’s premiums of the
continuing run off of several large credit insurance programs. Despite these offsetting factors, the rating outlook considers management’s guidance with respect to Triton’s future operations and A.M. Best’s
expectations that future profitability will be in line with historic performance, and risk-adjusted capitalization will remain supportive of the ratings.

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A.M. Best Co. has assigned a debt rating of “a-” to the recently announced $250 million fixed rate 6.875% senior unsecured notes due 2018 intended to be issued by PartnerRe Ltd. (PartnerRe) (Hamilton, Bermuda). The rating outlook is stable.

PartnerRe intends to utilize the proceeds of the senior notes issuance to retire $220 million of third party bank debt maturing in December 2008. The remaining proceeds will be used for general corporate purposes.

The debt rating reflects PartnerRe’s excellent business profile, strong risk-adjusted capitalization and strong enterprise risk management practices. Somewhat offsetting these strengths are PartnerRe’s exposure to large losses and moderately elevated financial leverage relative to current ratings. As of March 31, 2008, PartnerRe’s unadjusted total debt, preferred and hybrid securities approximated 26.1% prior to the partial equity credit provided under A.M. Best’s debt rating criteria.

PartnerRe’s strong and consistent earnings performance has contributed to solid fixed charge coverage measures. It is A.M. Best’s expectation that PartnerRe will maintain total debt to capital measures below 30%.

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A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of
“a” of New Zealand Local Government Insurance Corporation Limited (Civic Assurance) (New Zealand). The outlook for both ratings is stable.

The rating affirmations reflect Civic Assurance’s solid risk-based capitalization, continued operating profitability and strong liquidity. The ratings also acknowledge the company’s unique market position in the local government authorities sector.

Continued softening in premium rates due to competition and unfavorable claims experience has exacerbated Civic Assurance’s underwriting margin, leading to an increase in net loss ratio from 36.0% in 2006 to 52.6% in 2007. Nonetheless, with a combined ratio of approximately 83.6%, the company produced a positive underwriting profit of NZD 200,000 (USD 155,000) in 2007.

With approximately 43% of invested assets held in cash and New Zealand government bonds, Civic Assurance maintains strong liquidity in response to the short-tailed nature of its insurance liabilities. Return from the fixed income and property-oriented portfolio has enabled the company to generate an overall return on equity of approximately 10.4% in 2007, offsetting the deterioration in loss experience.

Civic Assurance’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, remained strong in fiscal year 2007, although a further increase in premium retention in 2007 led to a higher level of underwriting risk. The company further strengthened its surplus by 6.1% to NZD 19.2 million (USD 14.9 million) in 2007. Consistent surplus growth has allowed Civic Assurance to maintain its underwriting leverage at a prudent level over the past five years. In view of the company’s underwriting discipline and capital management philosophy, A.M. Best anticipates Civic Assurance will maintain adequate capitalization through retained earnings to support the higher level of underwriting risk inherent within its commercial risk oriented book of businesses.

Partially offsetting rating factors include the ongoing soft market environment, potential volatility associated with the increase in underwriting risk exposure and the limited long-term growth potential in Civic Assurance’s designated market.

Ongoing soft market conditions and intensifying competition, particularly in the commercial risk segment, are expected to challenge Civic Assurance’s underwriting profitability in the near term. Additionally, because of the company’s niche underwriting focus on the local government and public sectors, its premium growth over the long term might be limited.

The increase in underwriting risk exposure resulting from the change in reinsurance coverage could translate into a higher degree of volatility in underwriting profitability for Civic Assurance, although its capitalization remained solid to absorb potential loss from adverse claims experience. A.M. Best will continue to monitor loss development of Civic Assurance’s insurance book after the change in the reinsurance coverage.