The ratings reflect Trust Re's strong risk-adjusted capitalization, track record of solid operating performance and developing business profile, says A.M. Best.
Trust Re actively manages its risks to ensure its capital position remains at a strong level. During 2014, Trust Re's risk-adjusted capitalization strengthened following a capital injection of USD 30 million and full earnings retention, increasing shareholders' equity to USD 385.2 million at year-end 2014. Additionally, capital requirements have reduced with the company disposing of further real estate investments. Trust Re's risk-adjusted capitalization is expected to remain supportive of the current rating level following a further USD 30 million capital injection in April 2015, whilst high earnings retention should continue to support underwriting growth.
Trust Re has a track record of consistent profitability, with a five-year weighted average return on equity of 6.2%. In 2014, profits reduced marginally to USD 15.4 million from USD 18.0 million chiefly driven by a higher frequency of large losses emanating from Trust Re's Asian treaty business, which were partly offset by improved investment income and realized gains on the sale of equities and a real-estate subsidiary.
Disciplined risk selection and a prudent reserving policy have enabled the company to maintain robust technical results, evidenced by a five-year average combined ratio below 95%. Although investment returns remain relatively low, they continue to account for a significant proportion of overall earnings.
Trust Re has a developing business profile as a specialist underwriter of energy and property reinsurance across the Arab, Afro-Asian and Eastern European markets, underpinned by its long-standing relationships with key cedants. In addition, the company benefits from its exposure to the Lloyd's market via its investment in Trust Underwriting Limited (a corporate member at Lloyd's). Going forward, the composition of Trust Re's underwriting portfolio is not expected to change materially in the short term; however, some geographic diversification is anticipated as the company looks to grow in certain Asian and African markets.