Telefónica’s reinsurance captive rating affirmed
The telecoms company’s reinsurance captive has had affirmed its financial strength rating of A- (excellent) and the issuer credit rating of “a-”.
The outlook remains stable for both of Casiopea Re’s ratings.
The ratings of Luxembourg-based Casiopea Re reflect its “very strong risk-adjusted capitalisation, comprehensive reinsurance programme and historically good underwriting performance,” said rating agency AM Best.
An offsetting factor is the deterioration in its business profile and Telefónica’s, its weaker domestic position combined with a challenging macroeconomic environment and its high net debt position, said the rating agency.
AM Best anticipates that Casiopea Re’s very strong risk-adjusted capitalisation will be maintained going forward. In 2011, the company’s capitalisation was boosted by a capital injection of €80m by Telefónica in preparation for Solvency II requirements. But this has been reversed due to the delay in implementing the Solvency II directive, said Best.
The rating agency believes that the transfer of the handset business in March 2011 to Telefónica Insurance (a related company) has weakened Casiopea Re’s business profile on a stand-alone basis, as premium income is unlikely to return to similar levels prior to the loss of that line of business.
However, Best said it believes that Casiopea Re will maintain its strong integrated position within Telefónica’s risk management framework by reinsuring group risks.