A.M Best has given a financial strength rating of “A- (excellent)” and an issuer credit rating of “a-” to Casiopea Re, the reinsurance captive of Telefónica S.A. The outlook for both ratings remains stable.
The ratings of Casiopea Re reflect its strong risk-adjusted capitalisation, comprehensive reinsurance programme and underwriting performance.
“Casiopea Re’s very strong risk-adjusted capitalisation will be maintained going forward. In 2011, the company’s capitalisation was further strengthened by a capital injection of EUR 80 million by Telefónica in preparation for Solvency II requirements, but has been reversed due to the delay in implementing the Solvency II directive,” said the ratings firm.
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.
A.M. Best believes that the transfer of the handset business in March 2011 to Telefónica Insurance 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.
Despite this A.M Best thinks that Casiopea Re will maintain its position within Telefónica’s risk management framework by reinsuring group risks.
