Canadian Underwriter

Citadel assigned “very good” initial rating, CCR and Alea ratings affirmed

July 17, 2002   by Canadian Underwriter

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The Citadel General Assurance Company of Toronto and its counterpart, L’Unique Compagnie d’Assurances Generales of Quebec have been assigned an initial rating of B++, or “very good”, by rating agency A.M. Best.
Although both are subsidiaries of Winterthur Insurance, part of Credit Suisse Group, A.M. Best views them as seperately capitalized entities whose operations are not “strategically integrated” with Wintherthur.
The rating is based on Citadel’s good stand-alone capitalization to support underwriting and investment activities, and the geographic spread of risk. The fact that Citadel does not have dividend obligations to its parent company, coupled with strong realized capital gains, has allowed the company to maintain its capitalization.
Offsetting factors include the company’s deteriorating operating results and adverse development. Poor investment returns last year could not make up for underwriting losses, leading to an overall net loss, underwriting deficiencies and a negative impact on surplus.
“A.M. Best believes the Citadel will be challenged to
improve operating results while executing their commercial niche
strategy,” states a release from the rating agency.
The rating for L’Unique reflects good capitalization and strong underwriting results, partly offset by its geographic concentration in Quebec, and potential exposure to competition and regulatory change there.
Also, A.M. Best has affirmed the A-, “excellent”, rating of subsidiaries of the Alea Group. The rating agency cites strong levels of consolidated capital based, including an injection of US$247 million last year, and the financial flexibility due to support from majority shareholder Kohlberg Kravis Roberts & Co. Changes made since 2000, including rate increases in the recent renewal period and stricter underwriting, are expected to lead to double-digit return on equity and a combined ratio below 100% for 2002.
Caisse Centrale de Reassurance (CCR) has also seen its A, “excellent”, rating affirmed by A.M. Best. The Paris-based company shows strong capitalization, improving operating performance due to restructured underwriting and is a leader in France’s domestic catastrophe market. Although CCR has established offices in Canada and the Middle East in recent years, A.M. Best does not expect the company to change its scope significantly in the near term. Currently its domestic French natural catastrophe coverage is on a mandatory quota-share basis, with the state as guarantor.

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