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A.M. Best Affirms Ratings of Builders Reinsurance S.A.
[December 18, 2014]

A.M. Best Affirms Ratings of Builders Reinsurance S.A.


A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Builders Reinsurance S.A. (BRe) (Luxembourg), a subsidiary of Hochtief A.G., a large Germany-based construction company. The outlook for both ratings remains stable.

The ratings reflect BRe's solid earnings track record, strong risk-adjusted capitalisation as well as its broadening business profile.

Profitability has largely been driven by the company's solid underwriting results, demonstrated by a five-year average combined ratio of 61%. Technical performance benefits from prudent underwriting guidelines and a low level of net retention per risk. Underwriting results are expected to remain robust in 2014. However, deterioration is anticipated due to adverse reserve development relating to the company's subcontractor default insurance book.

The company's risk-adjusted capitalisation remains strong, underpinned by good internal capital generation in recent years. However, growth of capital and surplus has been constrained by the repatriation of share premium to Hochtief A.G. (USD 121 million from 2011 to December 2014).

BRe has a good and developing business profile in its niche markets. The portfolio principally comprises business risks of the Hochtief group and associated third party business, mainly written in the United States, but increasingly in Australia and Europe. Over the past year, the company has started to underwrite selective third party business that is not associated with the group. This business contributes marginally to overall premium levels; however, it is likely to contribute more in the mdium term.



Positive rating actions are unlikely in the near term. However, if BRe continues to demonstrate strong technical results as it expands into non-group related third party business whilst maintaining a supportive level of risk-adjusted capitalisation, this could place positive pressure on the ratings. Negative rating actions could follow prolonged weakening in BRe underwriting profitability as well as a significant deterioration in its risk-adjusted capitalisation.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.


Key insurance criteria reports utilised:

  • Alternative Risk Transfer
  • Catastrophe Analysis in A.M. Best Ratings
  • Evaluating Non-Insurance Ultimate Parents
  • Rating Members of Insurance Groups
  • Risk Management and the Rating Process for Insurance Companies
  • Understanding Universal BCAR

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

This press release relates to rating(s) 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 visit A.M. Best's Ratings & Criteria Center.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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