AM Best Affirms Ratings of Jupiter Insurance Limited - MarketWatch (press release)

LONDON, May 18, 2012 (BUSINESS WIRE) -- A.M. Best Europe -- Rating Services Limited has affirmed the financial strength rating of A (Excellent) and issuer credit rating of "a" of Jupiter Insurance Limited (Jupiter) (Guernsey). The outlook for both ratings is stable. Jupiter is a captive of BP p.l.c. (BP), an integrated global oil and gas company.

The ratings reflect Jupiter's strong risk-adjusted capitalisation and good underwriting performance. An offsetting factor for the ratings remains Jupiter's high level of risk retention, as well as its concentrated investment portfolio, which is held mostly with its parent, BP.

Jupiter's risk-adjusted capitalisation deteriorated in 2011, following an increase of 71% in net premiums written to USD 1,948 million (2010:USD 1)(2010:140 million), which was largely precipitated by an increase in the underwriting limit. Over the past few years, risk retention per event has increased significantly from USD 700 million in 2010 to USD 1,500 million as at 1 April 2011. Nevertheless, risk-adjusted capitalisation is expected to remain at a strong level over the medium term.

In 2011, the company reported an improvement in its technical performance with an underwriting profit of USD 1,680 million (2010:USD 461 million). This result was largely driven by the increase in earned premium and the reduction in net claims incurred, as a result of a lack of large claims during the year. Given the nature of business underwritten, technical results can be volatile year on year. The significant growth in Jupiter's underwriting portfolio in recent years could potentially contribute to the underlying volatility inherent in the lines of business underwritten.

Jupiter has over 99% of its asset base (2011:USD 7)(2011:952 million) invested in its parent via two discount notes of three months and 30-day duration. Despite Jupiter's lack of reinsurance protection and large underwriting limit, A.M. Best considers that the company's capital base could adequately absorb a small number of major claims.

Following the Gulf of Mexico oil spill in 2010, improvements in BP's risk management and safety are ongoing. These improvements could potentially have a positive impact on Jupiter's claims experience in the long term.

Upward rating actions are unlikely at present.

Downward rating actions may occur if there were a significant deterioration in the company's risk-adjusted capitalisation and/or a material increase in the retention levels on Jupiter's fronted programme (COMET). Additionally, any deterioration in the credit rating of BP could lead to negative actions being taken on Jupiter's current rating.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: "Alternative Risk Transfer (ART)"; "Catastrophe Analysis in A.M. Best Ratings"; "Risk Management and the Rating Process for Insurance Companies"; "Rating Members of Insurance Groups"; and "Understanding Universal BCAR". Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology .

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe -- Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com .

Copyright (C) 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

SOURCE: A.M. Best Company, Inc.

                            A.M. Best Company, Inc.            Grace Panti-Amoa, +(44) 20 7397 0331            Associate Financial Analyst            grace.panti-amoa@ambest.com            or            Sam Dobbyn, +(44) 20 7397 0264            Associate Director            sam.dobbyn@ambest.com            or            Rachelle Morrow, +(1) 908-439-2200, ext. 5378            Senior Manager, Public Relations            rachelle.morrow@ambest.com            or            Jim Peavy, +(1) 908-439-2200, ext. 5644            Assistant Vice President, Public Relations            james.peavy@ambest.com                    

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