Odyssey Re Gets Moody's Upgrade
NU Online News Service, July 15, 10:43 a.m. EDT?Moody's Investors Service said it upgraded the insurance financial strength ratings of Odyssey Re Holdings Corp's primary reinsurance and insurance subsidiaries to A3 from Baa1 yesterday.[@@]
The subsidiaries?Odyssey America Reinsurance Corporation and Clearwater Insurance Company (collectively known as "Odyssey Re")?were upgraded because of improved financial fundamentals, including enhanced operating performance, profitability and capital formation, Moody's said.
Moody's noted that Odyssey Re's earnings and shareholders' equity have improved significantly over the past two years, despite substantial growth in net written premiums.
New York-based Moody's said in its rating announcement that it expects the group's operating earnings to remain strong over the near term given the current favorable market conditions.
Moody's also cited other positive factors supporting the upgrade?Odyssey Re's good position in the U.S. property-casualty brokered reinsurance market, its focus on profitable underwriting, and a high-quality investment portfolio.
On the negative side, Moody's cited ongoing concern about the level of the group's reserves as a mitigating factor. But the rating agency noted that an expectation of potential modest adverse reserve development stemming from business written during the 1997 through 2001 time period is already embedded in the rating.
In addition to reserve adequacy, negative factors include the group's sizeable exposure to property catastrophe losses and the group's material credit exposure to reinsurance recoverables, Moody's said.
Going forward, the group's ratings could be positively impacted by sustained profitability (i.e. combined ratios under 100 through the market cycle) combined with stronger levels of reserve adequacy and lower underwriting leverage, Moody's advised.
Odyssey Re Holdings Corp., headquartered in New York City, writes commercial reinsurance coverages through its flagship company, Odyssey America Reinsurance Corporation. Odyssey Re Holdings is majority owned by Canadian-based Fairfax Financial.
According to statistics recently compiled by National Underwriter Insurance Data Services (based on information reported to the National Association of Insurance Commissioners), Odyssey America Reinsurance Corporation ranked as the seventh-largest U.S. reinsurer in 2003 (ranking based on net written premiums).
In 2003, the reinsurance operation, based in Stamford, Conn., wrote $1.8 billion in net written premiums and posted a combined ratio of 92.6. Year-end surplus stood at $1.5 billion.
For the first quarter of 2004, Odyssey America Reinsurance Company wrote $488 million in net written premiums, growing 10.2 percent over first-quarter 2003.
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