Nestle’s captive reinsurer, Intercona Re, has had its long-term issuer credit rating (long-term ICR) downgraded from “aa” to “aa-” and its financial strength rating (FSR) of A+ (Superior) affirmed by A.M. Best.
The outlook for the ratings of the Switzerland-based captive is stable.
The rating downgrade reflects Nestle’s weakened financial strength, following the changes to the leading food and beverage company’s capital structure.
The captive’s ratings reflect its importance to the parent company and its high level of integration with the group’s risk management function.
The ratings are reflective of Intercona’s balance sheet strength, categorised by A.M. Best as strongest, in addition to its strong operating performance, neutral business profile and appropriate enterprise risk management.
The balance sheet strength is underpinned by the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio and benefits from a positive assessment of the holding company, reflecting Nestle’s stronger captive profile.
Intercona’s adequate liquidity and capital buffers built up through a five-year average (2013-2017) combined ratio of 90 percent.
The captive’s disciplined underwriting enabled the company to report pre-tax profits of CHF 77.1 million ($77.71 million) in 2017, following a financial year loss of CHF 49.2 million ($49.59 million) in 2016, primarily driven by a natural catastrophe loss.
Intercona’s business profile assessment reflects its role as the captive reinsurer of Nestle.
The captive is a key part of its parent’s overall risk management framework, assisting with the mitigation of risk exposures and loss prevention, and providing the first layer of reinsurance protection on group’s insurance programme, providing a diverse underwriting portfolio by geography and product.