Sirius ratings affirmed as Nasdaq listing shields it from ‘parental influence’

30-11-2018

The Bermuda subsidiaries of Sirius have received a boost with rating agency AM Best affirming their financial strength ratings and removing them from under review with negative implications following the listing of parent Sirius International Insurance Group (SIIG) on the Nasdaq stock exchange.

The rating agency said the move, completed via a business combination with Easterly Acquisition Corp, will improve the company’s transparency and reinforced its independence from its ultimate parent, China Minsheng Investment Group Corp. This effectively shields its financial strength from “potential adverse parental influence” it explained.

The financial strength rating of ‘A’ has been affirmed for the following entities: Sirius Bermuda Insurance Company, Sirius International Insurance Corporation and Sirius America Insurance Company.

AM Best said that the enhanced governance and independence safeguards now in place, as well as the strong regulatory oversight of the jurisdictions in which SIIG and its rated subsidiaries operate, are expected to shield SIIG’s financial strength from potential adverse parental influence.

“The ratings reflect SIIG’s consolidated balance sheet strength, which AM Best categorises as very strong, as well as the group’s strong operating performance, neutral business profile and appropriate enterprise risk management,” the rating agency said.

“The ratings of Sirius Bermuda, Sirius International and Sirius America factor in their strategic importance to SIIG.”

It added that SIIG’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was comfortably at the strongest level at year-end 2017, as measured by Best’s Capital Adequacy Ratio (BCAR). Risk-adjusted capitalisation was supported by the full retention of earnings in recent years and relatively low underwriting leverage.

“The combination of an expected increase in underwriting risk associated with strong planned growth, an anticipated dividend yield of 1.75 percent and changes in capital structure following the public listing are expected to put some pressure on prospective BCAR results,” it said.

“Nevertheless, AM Best anticipates risk-adjusted capitalisation to remain in line with the strongest assessment over the medium term. The balance sheet strength assessment also considers SIIG’s moderate financial leverage and capital fungibility, which is considered limited, as a significant portion of consolidated shareholders’ equity is held as a Safety Reserve in Sweden.”

AM Best, Sirius Bermuda Insurance Company, Easterly Acquisition, Rating, Bermuda, North America

Bermuda Re