AM Best has affirmed the Financial Strength Rating of B++ (Good) and the long-term issuer credit rating (long-term ICR) of bbb+ (Good) of Sigurd Rück AG, the Switzerland domiciled captive owned by Italian multinational Saipem. The outlook for the ratings is stable.
Sigurd has a material exposure to credit risk driven by a cash-pooling agreement with the Saipem group, which acts as a partially offsetting factor in the assessment.
As of 31 December 2022, the funds Sigurd allocated to the cash-pooling with Saipem represented 47.7% and 70.3% of the company’s total assets and capital and surplus, respectively, down from 59.8% and 78.6% in 2021.
AM Best said the ratings reflect the captive’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The ratings agency said Sigurd has a strong operating performance record, evidenced by a five-year (2018-2022) weighted average return-on-equity and combined ratio of 10.4% and 67.8%, respectively, calculated by AM Best.
“Profitability has been supported by a low and stable expense ratio and a good, albeit volatile, loss ratio,” the ratings agency said.
“While operating profitability declined in 2022 as a result of a large claim incurred during the year, with the company’s combined ratio increasing to 97.7%, profitability is expected to remain strong prospectively.”
Sigurd’s very strong balance sheet strength assessment is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR).
AM Best expects Sigurd’s risk-adjusted capitalisation to remain at the strongest level, supported by the captive’s conservative reserving policies, its moderate exposure to catastrophe losses and its comprehensive retrocession programme with well-rated retrocessionaires.
Sigurd’s business profile benefits from geographic and product diversification derived from Saipem’s wide-ranging commercial activities.