MOODY'S DOWNGRADES INSURANCE FINANCIAL STRENGTH RATINGS OF CENTRE GROUP TO A1; RATINGS REMAIN ON REVIEW FOR FURTHER POSSIBLE DOWNGRADE
Moody’s Investors Service announced today that it has lowered the insurance financial strength ratings of Centre Group (Centre) to A1 from Aa3, with the ratings remaining on review for further possible downgrade. According to Moody’s, the rating review was initiated on December 11, 2002 following Zurich Financial Service’s (ZFS) announcement that Centre would be restructured, with its continuing operations becoming a business unit of Zurich Insurance Company’s (ZIC) North America Corporate Division, which is ultimately owned by ZFS. A listing of Moody’s ratings can be found below. Moody's is also reviewing whether the rating downgrade could affect other securities, including structured financings.
Moody’s noted that heretofore its ratings on Centre have been based primarily on the company’s own credit strengths as a stand-alone business unit, while also considering the group’s relationship with ZIC. With new financial and management reporting relationships with ZIC in place, however, and with a more traditional underwriting focus, the lines between the operations of Centre and the operations of ZIC are now much less clear.
Formed in 1988, the Centre Group of companies is wholly-owned by ZIC (insurance financial strength rating at A1) and ultimately, by ZFS. The Centre companies form the business unit within ZFS charged with creating non-traditional insurance and financial solutions for clients. As part of its restructuring initiative, Centre will no longer write new credit enhancement business. The continuing operations of Centre will focus solely on property & casualty finite risk insurance and reinsurance solutions for clients in North America, Bermuda, the United Kingdom and Continental Europe. Beginning this year, the continuing operations of Centre will report to ZIC’s North American Corporate Division as one of its major operating business units.
Moody’s stated that its continuing review will focus on Centre’s role within ZFS going forward, the business position and prospects of its ongoing operations, the cash flow assumptions related to its portfolio, the management of its risk exposures related to the discontinued business, its capital adequacy and its capital management plans over the short to medium-term. Moody’s stated that the ongoing support of ZIC and ZFS will be an important rating consideration for Centre going forward. However, the lack of an explicit parental guarantee from ZIC will require the rating agency to continue to measure capital adequacy levels at Centre through a quantitative analysis of the group’s expected cash flows and assets available to support its underwriting liabilities. Consequently, the capital adequacy of Centre on a stand-alone basis will continue to play a significant role in Moody’s analysis of the group. The rating agency expects to conclude its review in the weeks following the release of year-end 2002 results from Centre and ZFS on February 27, 2003.
The following ratings have been lowered and remain on review for further possible downgrade:
Centre Insurance Company - insurance financial strength to A1 from Aa3;
Centre Insurance International Company - insurance financial strength to A1 from Aa3;
Centre Life Insurance Company - insurance financial strength to A1 from Aa3;
Centre Reinsurance International Company - insurance financial strength to A1 from Aa3;
Centre Reinsurance Limited - insurance financial strength to A1 from Aa3;
Centre Reinsurance (US) Limited - insurance financial strength to A1 from Aa3;
Centre Solutions (Asia) Limited - insurance financial strength to A1 from Aa3;
Centre Solutions (Bermuda) Limited – insurance financial strength to A1 from Aa3;
Centre Solutions (US) Limited – insurance financial strength to A1 from Aa3; and
ZC Specialty Insurance Company – insurance financial strength to A1 from Aa3.
Moody's insurance financial strength ratings are opinions of the ability of insurance companies to repay punctually senior policyholder claims and obligations. For more information, visit our website at www.moodys.com/insurance.
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