A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a+" of Travelers Insurance Company Limited (TICL) (United Kingdom). The outlook of these Credit Ratings (ratings) remains stable.
The ratings of TICL reflect the support provided by St. Paul Fire and Marine Insurance Company (SPFM) in the form of an explicit guarantee covering all of TICL's liabilities arising from its underwriting activities. SPFM is a subsidiary of TICL's ultimate parent, The Travelers Companies, Inc. (Travelers). A.M. Best believes Travelers remains committed to TICL, which is its main underwriting operation in the United Kingdom and Ireland. The ratings also reflect TICL's solid stand-alone risk-adjusted capitalisation. Offsetting these strengths is the company's weak underwriting performance.
TICL maintains solid risk-adjusted capitalisation with a sufficient cushion to absorb higher-than-expected losses. Shareholders' funds fell to GBP 454 million in 2015 (2014: GBP 504 million) but are expected to increase by approximately 5-10% in 2016 supported by positive underwriting and investment earnings.
The company is a specialist underwriter of liability and commercial property business in the U.K. Gross written premium (GWP) is expected to decline by about 10% in 2016, reflecting sustained competitive conditions in TICL's core markets and its exit from certain classes to address profitability challenges. GWP is expected to show modest growth in 2017, supported by targeted rate increases and recently launched products.
TICL's underwriting record is weak as demonstrated by a five-year average combined ratio of 120%. A higher combined ratio of 132% in 2015 (2014: 119%) was due to flood losses and a high incidence of large claims, which offset the impact of remedial underwriting actions. Further remedial actions are expected to support an improvement in underwriting profitability in 2016 and beyond. An underwriting profit is forecast for 2016, driven by strong reserve releases in the company's property/casualty books. Although net expenses will reduce the expense ratio is expected to remain high in 2016, reflecting reduced premium volumes. Historically, pre-tax profits have depended on investment income but this has been dampened in recent years by the low interest rate environment.
This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings
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Copyright 2016 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.
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A.M. Best
George Athanasopoulos, +44 20 7397 0330
Financial Analyst
george.athanasopoulos@ambest.com
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Catherine Thomas, +44 20 7397 0281
Senior Director, Analytics
catherine.thomas@ambest.com
or
Christopher Sharkey, +1 908 439 2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, +1 908 439 2200, ext. 5644
Director, Public Relations
james.peavy@ambest.com