2013-01-22 17:38:58 -

A.M. Best Europe – Rating Services Ltd. has assigned the financial strength rating of A- (Excellent) and issuer credit ratings of “a-” to Seguros Catalana Occidente, S.A. de Seguros y Reaseguros (SCO) and Bilbao, Companía Anónima de Seguros y Reaseguros, S.A.
(SB), both wholly-owned subsidiaries of Grupo Catalana Occidente, S.A. (GCO). The outlook assigned to all ratings is stable. All companies are domiciled in Spain.

The ratings of SCO and SB reflect their adequate standalone risk-adjusted capitalisation, excellent operating performance and good business profile. Additionally, the ratings of SB reflect its strategic importance to its intermediate parent, SCO, through the provision of its predominantly primary business derived from the Bilbao region in Spain.
An offsetting rating factor is the high exposure

to Spanish sovereign and financial institutions debt, both at the company level and the GCO consolidated level.

SCO and SB maintain adequate standalone risk-adjusted capitalisation, supported by internal capital generation. In 2012, GCO acquired Plus Ultra Seguros (former Groupama Seguros y Reaseguros, SAU) using internal resources in the form of an annually renewable loan issued by SCO and SB. Although the subsequent decline in the standalone risk-adjusted capitalisation of both entities is viewed cautiously, A.M. Best considers the flexibility of the loan favourably. SCO and SB benefit from the good financial flexibility of GCO, where group capital is held and is considered to be fungible across GCO’s subsidiaries. SCO and SB’s assigned ratings allow for the outcome of the eurozone investment stress tests A.M. Best has performed, both at a standalone and GCO group level.
The result from these stress tests suggests that both companies’ levels of risk-adjusted capitalisation are within the bounds of their respective ratings.

Despite the on-going economic crisis in Spain and the subsequent tightening in its underwriting margins, SCO and SB’s operating performance remains strong, as demonstrated by their five-year average return on capital and surplus of 43.5% and 31.5%, respectively. Prudent underwriting guidelines and limited natural catastrophe exposure, due to the existence of the national government’s scheme covering catastrophes (Consorcio de Compensación de Seguros) have resulted in relatively stable and consistent technical profits for both companies, with a combined ratio of less than 90% over the last five years.

SCO operates throughout Spain, writing predominantly life, multi-risk and motor insurance. SB is a leading composite insurer in Bilbao, where it benefits from strong brand name recognition. As at third quarter 2012, SCO and SB wrote approximately EUR 1 billion and EUR 0.5 billion of gross written premiums, respectively, on a standalone basis. SCO and SB operate through a large network of agencies and tied agents, which has supported customer loyalty during difficult economic conditions. A negative rating factor relates to the size of SCO and SB compared with the more dominant players in the market and their concentration in Spain.

Upwards rating movement is unlikely in the next two years. Negative rating actions could occur if there were a deterioration in risk-adjusted capitalisation, either at a consolidated or standalone level, tied to investment losses or a deterioration of the operating environment in Spain. Additionally, downwards ratings pressure could occur if the perceived fungibility of capital across the subsidiaries of GCO was weakened.

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. Key criteria utilised include.

“Catastrophe Analysis in A.M. Best’s Ratings”, “Rating Members of Insurance Groups”, “Risk Management and the Rating Process for Insurance Companies”; and “Understanding. Universal BCAR”. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..



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Best Europe - Rating Services Limited Supplementary Disclosure : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww .. .


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