MOODY'S ASSIGNS Ba2 RATING TO THE GUARANTEED SENIOR NOTES OF TERRA NOVA INSURANCE (UK) HOLDINGS PLC
London / New York, 10-13-95 -- Moody's has assigned a Ba2 rating to the senior notes, due 2005, of Terra Nova Insurance (UK) Holdings plc. The notes are unconditionally guaranteed by Terra Nova (Bermuda) Holdings Ltd. ("Terra Nova"), the ultimate parent company. The rating agency cited Terra Nova's established position in the London insurance market, its sound asset quality and reasonable capitalization, and its improved management of underwriting exposures as positive rating considerations. Moody's noted, however, that these were largely offset by the volatile, fragmented, and intensely competitive nature of the London market, by the relatively modest size of the group's principal insurance subsidiaries, by the group's limited favorable operating experience following operating losses in recent years, and by the parent's significant financial leverage.
Expanding on its rating rationale, Moody's noted that Terra Nova's increasing role as a lead underwriter on its insurance and reinsurance contracts reflects its heightened profile in its chosen markets and that it has enabled the insurer to exert greater influence on the pricing and other terms of its insurance and reinsurance contracts. The rating agency added that in the wake of losses arising from the London Market excess spiral in recent years, Terra Nova had exited the aviation business, and had tighened the management of its gross and net loss exposures. Exposure to recoverables from other insurers and reinsurers, and to potential problem recoveries, has also been reduced substantially in recent years. Moody's added, however, that debt leverage at the holding company remained high, even following the the group's recent equity rights offering. Competition from much larger insurers was also cited as a general credit concern.
Terra Nova (Bermuda) Holdings Ltd. is a holding company whose two principal subsidiaries -- Terra Nova (Bermuda) Insurance Company Ltd. and Terra Nova Insurance Company (UK) -- specialize in marine insurance and property and casualty reinsurance. As of June 30, 1995 Terra Nova (Bermuda) Holdings Ltd. reported year-to-date consolidated net premiums written of $203 million, and shareholders' equity of $117 million. On October 10, 1995, Terra Nova (Bermuda) Holdings Ltd. announced the completion of an equity rights offering with its existing shareholders, thereby raising $50 million of additional equity capital for the group.
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