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TMCNet:  A.M. Best Revises Outlook of RoyalStar Assurance Limited

[January 15, 2013]

A.M. Best Revises Outlook of RoyalStar Assurance Limited

OLDWICK, N.J. --(Business Wire)--

A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit rating of "a-" of RoyalStar Assurance Limited (RSA (News - Alert)) (Nassau, Bahamas).

The ratings reflect RSA's consistent overall profitability, excellent capitalization and established presence within the Caribbean market. RSA continues to produce positive operating results, which are a function of the company's prudent underwriting philosophy and steady stream of investment income. The positive outlook reflects RSA's resilient underwriting results, which consistently places it among the top of its Caribbean peers.

RSA writes all of its business in the Caribbean, which exposes it to frequent and severe weather-related events. Although this makes RSA somewhat dependent on reinsurance as part of its overall risk management strategy, its panel of high quality reinsurers mitigates much of this credit risk.

These positive rating factors are partially offset by RSA's geographic concentration, aforementioned dependency on reinsurance and exposure to weatherrelated catastrophes, as well as sluggish economic conditions in the Bahamas. Furthermore, the Bahamas and other Caribbean insurance markets have become increasingly competitive as indigenous and outside insurers seek to gain market share in the region.

Key rating drivers that may lead to positive rating actions on RSA include its continued strong underwriting results in conjunction with surplus appreciation and improvements in the Bahamas' macroeconomic environment. Negative rating triggers could include prolonged adverse operating results that are exacerbated by a series of large catastrophic events.

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 utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding Universal BCAR"; "Catastrophe Analysis in A.M. Best Ratings"; "Insurance Holdings Company and Debt Ratings"; and "Evaluating Country Risk." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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