Additionally, A.M. Best has removed from under review with negative implications and affirmed the Long-Term ICR of "bbb" of Sirius International Group, Ltd. (SIG) (Bermuda), an intermediate nonoperating holding company. Concurrently, A.M. Best has assigned a Long-Term ICR of "bbb" to Sirius International Insurance Group, Ltd. (SIIG) (Bermuda), the outlook is stable.
The removal of the ratings from under review follows SIIG's listing on the Nasdaq, via a business
combination with Easterly Acquisition Corp., on 5 November 2018. A.M. Best believes that by complying
promptly with the Nasdaq listing requirements, SIIG has strengthened its governance and improved its
transparency, and thereby has reinforced its independence from its ultimate parent, China Minsheng Investment Group Corp., Ltd (CMIG). The enhanced governance and independence safeguards now in place, as well as the strong regulatory oversight of the jurisdictions in which SIIG and its rated subsidiaries operate, are expected to shield SIIG's financial strength from potential adverse parental influence.
The ratings reflect SIIG's consolidated balance sheet strength, which A.M. Best categorizes as very
strong, as well as the group's strong operating performance, neutral business profile and appropriate enterprise risk management. The ratings of Sirius Bermuda, Sirius International and Sirius America factor in their strategic importance to SIIG.
SIIG's balance sheet strength is underpinned by its risk-adjusted capitalization, which was comfortably at
the strongest level at year-end 2017, as measured by Best's Capital Adequacy Ratio (BCAR). Risk-adjusted capitalization was supported by the full retention of earnings in recent years and relatively low underwriting leverage. The combination of an expected increase in underwriting risk associated with strong planned growth, an anticipated dividend yield of 1.75% and changes in capital structure following the public listing are expected to put some pressure on prospective BCAR results. Nevertheless, A.M. Best anticipates risk-adjusted capitalization to remain in line with the strongest assessment over the medium term. The balance sheet strength assessment also considers SIIG's moderate financial leverage and capital fungibility, which is considered limited, as a significant portion of consolidated shareholders' equity is held as a Safety Reserve in Sweden.
SIIG has a long-term track record of strong operating performance, supported by solid underwriting
results. The combined ratio increased to 107.6% in 2017, much higher than the five-year (2013-2017) weighted average of 89%, due to large losses. A.M. Best expects technical results to return to pre-2017 levels in the short to medium term, supported by successful execution of growth plans and stable earnings in the accident and health segment.
SIIG is an established midsized international reinsurer, specializing in shorter tail lines of business, which
leads or co-leads over half of its reinsurance business, and benefits from a stable client base. The group has a good level of diversification by line of business and by geography, which has been enhanced in recent years by expansion into the accident and health segments, as well as into selected specialty and casualty lines.
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