Lloyd's Syndicate 0382 -- Moody's Analytics downgrades the Continuity Opinion of Lloyd's Syndicate 0382 to B^ (Average)

Microsoft Word - Syndicate 0382 Continuity Opinion Press Release 10 13 London New York Robert S. Smith Allerton G. Smith Director Senior Director Moody's Analytics UK - Insurance Capital Markets Research Group Moody's Analytics Moody's Analytics JOURNALISTS: 44 20 7772 5456 JOURNALISTS: 212-553-0376 SUBSCRIBERS: 44 20 7772 5454 SUBSCRIBERS: 212-553-1653 Moody’s Analytics downgrades the Continuity Opinion of Lloyd’s Syndicate 0382 to B^ (Average). LONDON, 3rd October 2013 – Moody's Analytics (Moody’s) today downgraded the B+^ (Above Average), under review for possible downgrade, Continuity Opinion of Lloyd's syndicate 0382 (Hardy (Underwriting Agencies) Limited) to B^ (Average). The downgrade was in light of the syndicate having recorded further annual losses in 2012, following losses in 2011, which were outside expectations for its peer group, and with Moody’s internal scorecard, based on indicative returns on capital, indicating a score of B (s). The outlook for the Opinion is stable. The syndicate, 100% backed by CNA Financial Corporation and with a 2013 capacity of £330m, writes a short tail, composite account. The syndicate recorded a loss of 9% NPE on an annually accounted basis for 2012 on a combined ratio of 111% (including forex) at 31.12.12, having previously recorded a loss of 20% NPE for 2011 on a combined ratio of 121% at 31.12.11. Moody’s stated that, in terms of reported results, on a cross-cycle basis the syndicate had recorded average profits of 8% of NPE for 2004 to 2012 under annual accounting, performing in line with B+ (Above Average) continuity opinion benchmark returns in terms of indicative average annual returns on capital. However, the results included an exceptional foreign exchange gain of 21% NPE for 2008, with returns in line with B (Average) benchmarks based on adjusted results reflecting market average foreign exchange gains for 2008. Moody’s internal scorecard, based on indicative annual returns on capital, also indicates a score of B (s). Moody’s noted that the losses recorded in 2011 and 2012 had primarily been due to the Property Catastrophe account which had been significantly restructured since 2011, with the book reducing to18% of the book in 2012 from 35% of the book in 2011. New capital had also come in to underpin the business with CNA Financial (operating companies Moody’s Investors Service A3, positive outlook, Insurance Financial Strength Ratings) acquiring the business in 2012, albeit that the syndicate represented only circa 5% of the group’s business. However, with the further losses recorded in 2012 materially outside expectations for its peer group and Moody’s internal scorecard, based on indicative annual returns on capital, currently indicating a score of B (s), Moody’s considers that despite the additional support from CNA underpinning the business and the restructuring of the Property Treaty account, the syndicate’s Continuity Opinion is best positioned towards the top of the B^ (Average) peer group at this stage of its development. Syndicate 0382’s B+^ (Above Average) Continuity Opinion has therefore been downgraded to B^ (Average), reflecting Moody’s view of relative performance and continuity prospects for the syndicate over the insurance cycle. The outlook for the Opinion is stable. The last action was in July 2013 when the syndicate’s B+^ (Above Average), stable outlook, Continuity Opinion was placed under review for possible downgrade. It should be noted that the continuity opinion for syndicate 0382 (in contrast to most assigned Continuity Opinions) is based solely on public information or limited non-public information and that restricted access to data requested for the Continuity Opinion may have had a material impact on the assigned continuity opinion. Hardy Syndicate 0382 is a composite syndicate, backed 100% by CNA Financial Corporation, which operates within the Lloyds of London insurance market. * * * © Copyright 2013 Moody’s Analytics, Inc. and/or its licensors and affiliates (collectively, “MOODY’S”). All rights reserved. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT. 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