JackW0 Posted October 3, 2009 Share Posted October 3, 2009 Getting access to east European financial martkets is not an easy task, I hope that FFH culture will eventually prevail, but knowing it from my personal experience it may take some time. Jack W. TEXT-S&P: Polskie Towarzystwo Reasekuracji outlk neg 11:35am ET (Reuters) (The following statement was released by the rating agency) Oct 2 - Standard & Poor's Ratings Services said today that it had revised its outlook on Polish Reinsurer Polskie Towarzystwo Reasekuracji S.A. (Polish Re) to negative from stable and affirmed the 'BBB' local currency long-term counterparty credit and insurer financial strength ratings. "The outlook revision reflects our view that Polish Re may fail to achieve sustainable underwriting profit in the medium term, given its current marginal competitive position," said Standard & Poor's credit analyst Victor Nikolskiy. The ratings on Polish Re reflect the continuing financial and operation support Polish Re receives from its new parent Fairfax Financial Holdings Ltd. (Fairfax; BBB-/Stable/--), adequate capitalization levels underpinned by a recent capital increase, and the good liquidity of the investment portfolio covering technical reserves. These positive factors are offset by Polish Re's only marginal competitive position, with very high concentrations on top cedants, and an increased investment risk profile with high exposure to equity risks. The negative outlook reflects our view that Polish Re may fail to achieve sustainable underwriting profit in the medium term. "We will lower the ratings if the company fails to achieve underwriting profits," said Mr. Nikolskiy. Moreover, any material negative development in shareholder support, capitalization, investment portfolio quality, competitive position, operating performance, or negative rating actions on the parent could lead to negative rating actions. If the company demonstrates an ability to grow profitably, however, the outlook could be revised to stable. RELATED RESEARCH Group Methodology, April 22, 2009 Interactive Ratings Methodology, April 22, 2009 Link to comment Share on other sites More sharing options...
oldye Posted October 3, 2009 Share Posted October 3, 2009 These people are twits, its mind boggling that anyone pays any attention to their ratings. I'm not quite sure they understand what a AAA or AA means anymore...in the real world most people would probably guess that a AAA has next to 0 chance of default. A AA must have a slightly greater than 0 chance of default but less than a A etc. What chance is there that 100 million dollar Polish Re suffers so many losses that Fairfax won't be able to come in and keep them from paying claims/debt? :D Link to comment Share on other sites More sharing options...
watsa_is_a_randian_hero Posted October 3, 2009 Share Posted October 3, 2009 These people are twits, its mind boggling that anyone pays any attention to their ratings. I'm not quite sure they understand what a AAA or AA means anymore...in the real world most people would probably guess that a AAA has next to 0 chance of default. A AA must have a slightly greater than 0 chance of default but less than a A etc. What chance is there that 100 million dollar Polish Re suffers so many losses that Fairfax won't be able to come in and keep them from paying claims/debt? :D Well from their point of view they can't give credit to FFH because of Prem's investment track record. However, they see large concentrated equity portfolios at Polish Re, and at FFH. This makes performance between the 2 correlated. So from their point of view, a market crash coincided with a large reinsurance event could mean FFH doesnt have the $$$ to save Polish Re. Not that I agree with that argument, because FFH's equities have been much safer than Hartford's or Lincoln's fixed income; but the rating agencies don't look at that. They are analyzing 100's of insurers and just plugging numbers into their models. Link to comment Share on other sites More sharing options...
oldye Posted October 3, 2009 Share Posted October 3, 2009 coming from the horses mouth: Correspondence Between Ratings And Probabilities Of Default (cont.'d) Rating Probability of Default (%) AAA 0.365 AA+ 0.523 AA 0.898 AA- 1.164 A+ 1.525 A 1.884 A- 2.606 BBB+ 4.007 BBB 5.885 BBB- 10.737 BB+ 13.500 BB 19.328 BB- 25.619 B+ 33.231 B 44.083 B- 55.632 CCC+ 68.013 CCC 75.506 CCC- 87.498 So Fairfax's rating pretty much implies that the company could get wiped out 1 in 20 year event. I think thats wrong, it would have to be a confluence of insurable disaster + economic crash on a greater level than we've ever seen. Pretty much the kind of event that would wipe out the western world...which call me crazy but I'd hope that the odds of that are far lower than 1 in 20. Link to comment Share on other sites More sharing options...
beerbaron Posted October 4, 2009 Share Posted October 4, 2009 coming from the horses mouth: Correspondence Between Ratings And Probabilities Of Default (cont.'d) Rating Probability of Default (%) AAA 0.365 AA+ 0.523 AA 0.898 AA- 1.164 A+ 1.525 A 1.884 A- 2.606 BBB+ 4.007 BBB 5.885 BBB- 10.737 BB+ 13.500 BB 19.328 BB- 25.619 B+ 33.231 B 44.083 B- 55.632 CCC+ 68.013 CCC 75.506 CCC- 87.498 So Fairfax's rating pretty much implies that the company could get wiped out 1 in 20 year event. I think thats wrong, it would have to be a confluence of insurable disaster + economic crash on a greater level than we've ever seen. Pretty much the kind of event that would wipe out the western world...which call me crazy but I'd hope that the odds of that are far lower than 1 in 20. When it says probability of default, does it mean probability of default into the next year, next 5 year, next month? Are those numbers statistical from models or were they taken from field experience? Regards Link to comment Share on other sites More sharing options...
watsa_is_a_randian_hero Posted October 4, 2009 Share Posted October 4, 2009 those are annual default %'s, i believe Link to comment Share on other sites More sharing options...
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