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Energy insurer asks S&P to withdraw ratings

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Energy insurer asks S&P to withdraw ratings

Oil Casualty Insurance Ltd. on Friday said it has asked S&P Global Ratings Inc. to withdraw its financial ratings after the agency gave the insurer a negative outlook.

In its report Thursday, New York-based S&P affirmed the Hamilton, Bermuda-based mutual insurer and reinsurer’s BBB+ financial strength and long-term counterparty credit ratings, but said the outlook was negative.

The report says that while OCIL provides the energy industry with a “stable source of capacity, management has been proactively trying to lower underwriting volatility by increasing diversification into new products, lines and industries with much lower limits,” and it will “take time to produce the desired results.” 

It said the negative outlook reflects its view that the diversification has “not yet gained enough traction to sustain its fixed-charge coverage,” which is a measure of a firm's ability to meet its fixed-charge obligations. It said the insurer’s earnings and fixed-charge coverage “have experienced significant volatility during the past several years.”

S&P said in its report that it has withdrawn its ratings at OCIL’s request.

In a statement issued Friday, OCIL President and CEO CEO Bertil Olsson said the company is disappointed in the rating, “which followed our sixth consecutive fiscal year of positive income and historic capital level” for the year ended Nov. 30, 2016.

Mr. Olsson said: “The decision to withdraw the rating is based on S&P’s modeling criteria, which lacks the flexibility to recognize the significant improvements in OCIL’s business model over the past 10 years; the existing S&P rating provides little commercial advantage to retaining existing clients or attracting new business, and internal resources can be better utilized by focusing on the execution of OCIL’s strategic plan rather than managing to S&P’s expectations.”

When asked to comment on the withdrawal, an S&P spokesman said in a statement, “In general, when a rating is withdrawn, the final research update stands as our view of the issue/issuer.”

Oldwick, New Jersey-based A.M. Best Co. Inc. on Thursday reaffirmed OCIL’s A- financial strength rating with a stable outlook.

 

 

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