Standard & Poor’s Ratings Services affirmed its long-term counterparty credit and insurer financial strength ratings on Bahrain-based Trust International Insurance & Reinsurance Co. B.S.C.(c) Trust Re (Trust Re). The ratings were then withdrawn at the issuer’s request. The outlook was stable at the time of the withdrawal.
At the time of the ratings withdrawal, the ratings on Trust Re reflected our view of the company as the core operating entity of Trust Re Group (the group). Supporting factors included the group’s strong operating performance, good capitalization, and good competitive position. Its high investment risk tolerance partially offset these positive factors.
For 2011, in line with our expectation, the group posted a strong net combined ratio of 96% and an 8% return on equity, reflecting its selective underwriting process. (Lower combined ratios indicate better profitability. A combined ratio of greater than 100% signifies an underwriting loss.) The group’s performance compares well with that of most of its regional peers. Unlike Trust Re, its peers were affected by the record catastrophe losses in 2011.
In line with our expectation, the group reduced risk in its investment profile by reducing its holdings in equities and real estate. At the end of June 2012, equities and real estate accounted for 16% (2011: 22%) and 6% (2011: 17%), respectively. The remainder of the portfolio comprised bonds (13%) and cash (65%). While we view this change in investment strategy positively, we consider Trust Re’s current investment risk tolerance to be high compared with non-life insurance industry norms.
Because of the retained earnings and the reduction in investment risk, the group’s risk-based capital, measured using our model, improved to the upper end of ‘BBB’ level. It had deteriorated slightly at year-end 2011 because of growth in premium and reserve risks relative to its capital.
