first_imgAM Best Co has downgraded the financial strength rating (FSR) to B+ (Good) from B++ (Good) and the issuer credit rating (ICR) to “bbb-” from “bbb” for First Beacon Insurance Company (First Beacon) (Burlington, VT), a captive insurer of Alcatel-Lucent. The outlook for both ratings remains negative.The rating actions reflect concerns over the financial position of First Beacon’s ultimate parent, Alcatel-Lucent. Supporting the rating is a robust level of risk-adjusted capitalization and a stable operating performance.A.M. Best has concerns at Alcatel-Lucent’s long-term business profile and financial strength. The 2009 financial year witnessed a 10.8% fall in revenue and a third successive year of overall losses for the company. Although Alcatel-Lucent maintains a good range of products, demand remains weak and competition is strong. First Beacon’s business profile is largely dependant on the economic success of Alcatel-Lucent and any additional deterioration in the financial position of the parent is likely to add further pressures to the captive’s rating level.The upholding of substantial levels of capital within First Beacon supports what A.M. Best considers to be a good level of risk-adjusted capitalization. Furthermore, regulatory requirements to maintain a good level of capital and surplus give A.M. Best some confidence that First Beacon will maintain its current capital position.Although FBIC has witnessed a substantial decrease in premium income over recent years, the captive’s combined ratio has remained relatively stable within the range of 75% to 90%. A.M. Best anticipates that operating performance is likely to be maintained within this range over the next two years.Lucent was formed as a spinoff from AT&T in 1996 as a manufacturer of communications and networking hardware in 1996. Because of poor performance, it merged with Alcatel in 2006. The subsequent company is based in Paris.For current Best’s Credit Ratings and independent data on the captive and alternative insurance market, please visit www.ambest.com/captive(link is external).The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology(link is external).Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com(link is external).Source: LONDON–(BUSINESS WIRE)–4.7.2010.last_img

Leave a Reply

Your email address will not be published. Required fields are marked *