A.M. Best has assigned a financial strength rating of “A+ (Superior)” and an issuer credit rating of "aa" to Intercona Re AG. The outlook assigned to both ratings is stable.
According to the agency, the ratings reflect Intercona's importance as the wholly-owned captive reinsurer of Swiss food and beverage company Nestlé, as well as its high level of integration within the group's risk management function.
Furthermore, A.M Best has said that the ratings reflect Intercona's “excellent risk-adjusted capitalisation, robust technical performance and diversified business portfolio”, by line of business and geographic location.
Intercona's primary function is to provide the working layer of reinsurance protection, absorbing losses from the group's global insurance programme.
The captive benefits from Nestlé's financial strength and is, according to A.M Best, a “key part of its parent's overall risk management framework”, assisting with the mitigation of risk exposures and loss prevention. Intercona also enables Nestlé to optimise its insurance protection in terms of scope and cost.
A.M Best commented: “Intercona's risk-adjusted capitalisation is likely to remain strong in 2015, supported by large equalisation and fluctuation reserves and the retention of profits.”
“The captive has maintained a robust underwriting performance despite incurring a number of large losses in recent years, as demonstrated by its five-year average combined ratio of 84 percent.”
Intercona's capital and performance is somewhat protected by its modest per risk and aggregate underwriting limits.
The agency confirmed that positive or negative rating actions on Intercona may occur if there is a material change in the credit worthiness of Nestlé.
Negative rating actions could also follow a prolonged weakening in Intercona’s underwriting profitability as well as a significant deterioration in its risk-adjusted capitalisation.
Furthermore, a decline in the strategic importance of Intercona to Nestlé would result in negative rating pressure.
