NEW YORK, NY (February 12, 2019) – Kroll Bond Rating Agency (KBRA) affirms the insurance financial strength rating (IFSR) of A- of Premia Reinsurance Ltd. (Premia), a class 4 Bermuda specialty reinsurer focused on acquiring nonlife run-off liabilities. KBRA also affirms the issuer rating of BBB of the organization’s ultimate holding company, Premia Holdings Ltd. (Premia Holdings). Premia and Premia Holdings are collectively referred to as Premia Re. Additionally, KBRA affirms the rating of BBB of Premia Holdings’ outstanding senior unsecured notes. The Outlook for all ratings is Stable.

The ratings reflect Premia Re’s sound capitalization, which KBRA believes is sufficient to support the company’s planned acquisition strategy of run-off liabilities in the medium term. Part of Premia’s capital consists of $110 million of senior unsecured notes due January 2024. Additionally, Premia Re’s ratings benefit from the equity investment of Arch Capital Group Ltd. (Arch Capital) (NASDAQ: ACGL), a 25% quota share reinsurance agreement between the companies, as well as underwriting, systems, and operational support from Arch Capital. Moreover, Premia Re’s management team has extensive experience in the reinsurance market, especially in the run-off sector, and has successfully closed on a number of run-off transactions which highlight its differentiated approach and experience during its short operating history. Premia Re acquires companies and portfolios in less volatile lines of business, eschewing property catastrophe exposure, and will maintain conservative financial leverage – currently about 22%.

Balancing these strengths is the start-up nature of the company and the execution risk for Premia Re’s management team as they enter a mature sector with established competitors. Although KBRA acknowledges that nonlife run-off business has demonstrated favorable return characteristics that are largely uncorrelated to the overall financial markets, the potential still exists for run-off business to experience adverse reserve development. This risk has been somewhat mitigated by the acquisition in September 2018 of Alan Gray LLC, a well-established and highly respected claim and audit service firm that will represent a second operating pillar for Premia. Premia Re reported net income and a breakeven combined ratio in 2017, its first year of operations. KBRA expects improved results in 2018. Finally, key man risk exists in that Premia Re needs to continue to build out its management team over time to develop bench strength for succession planning.

The Stable Outlook reflects KBRA’s expectations that Premia Re will continue to maintain sound capitalization while successfully executing its run-off acquisition strategy. Additionally, KBRA expects Premia Re to experience minimal credit losses in its investment portfolio, retain key members of its management team, and preserve financial flexibility through conservative balance sheet metrics.

The ratings are based on KBRA’s Global Insurer & Insurance Holding Company Rating Methodology published on October 10, 2017.

An updated report will be available shortly.

HAMILTON, Bermuda–(BUSINESS WIRE)–Jan 10, 2019–Premia Holdings Ltd. (“Premia”), a leading reinsurance group focused on reinsuring and acquiring companies in runoff, has acquired Public Service Insurance Company (“PSIC”) and its wholly-owned subsidiary Western Select Insurance Company (“WSIC”) from the Director of the Illinois Department of Insurance, acting in her capacity as statutory and court affirmed Rehabilitator for Public Service Insurance Company (“Rehabilitator”).

In this groundbreaking transaction, Premia has acquired certain assets of PSIC (including WSIC) and the direct insurance liabilities of PSIC, while other assets and liabilities were retained in and channeled to the Estate of PSIC, in rehabilitation.

In addition to the Illinois Department of Insurance’s approval, the transaction was approved by the presiding judge of the Chancery Division of the Circuit Court of Cook County Illinois overseeing the Rehabilitation of the PSIC Group. After notice, an objection period, and extensive briefing on the issues, the Court approved the Amended Plan and the Stock Purchase Agreement between Premia Holdings Inc. and the Rehabilitator.

As noted by Bill O’Farrell, Chief Executive Officer of Premia Holdings Ltd., “This was a new and elegant solution for the policyholders of Public Service and the fact that not a single claimant, policyholder, ceding company or reinsurer objected to this transaction is further evidence of the compelling solution in this matter and a real credit to the Illinois Department of Insurance.”

The transaction closed on January 9, 2019. Following closing, Mr. O’Farrell also stated, “I am very pleased that we were able to deliver this solution to the Public Service Estate. It provides better capital support to Public Service’s policyholders and provides Premia a strong operating platform for additional U.S. transactions.”

DLA served as deal counsel to Premia in this matter, while Griffin Financial Group acted as financial advisor to the Director of the Illinois Department of Insurance in her capacity as Rehabilitator of PSIC.

About Premia

Premia Holdings Ltd. is a reinsurance group with operations in Bermuda, the U.S. and Europe that is focused on sourcing, structuring and servicing run-off business. With over $500 million in capital, Premia is well equipped to handle acquisitions and reinsurance transactions in the global P&C run-off market. Premia is sponsored by Arch Capital Group Ltd. and Kelso & Company.

Cautionary Statement

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This release or any other written or oral statements made by or on behalf of Premia Holdings Ltd. and its subsidiaries may include forward-looking statements, which reflect our current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements.

Forward-looking statements can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or their negative or variations or similar terminology. Forward-looking statements involve our current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements.

All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contact

Premia Holdings Ltd.
Scott Maries, 441-278-9176
Chief Financial Officer
smaries@premiareltd.com

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A stock purchase agreement provides a Bermuda-headquartered group that hit the ground running a little more than a year ago with an opportunity to execute its strategy of sourcing, structuring and servicing runoff business.

Documents filed recently in the Cook County, Ill., Court of Chancery show that a U.S. affiliate of Premia Holdings Ltd. has agreed to acquire the outstanding stock of rehabilitating commercial lines insurer Public Service Insurance Co. in a transaction that involves the transfer of total net reserves of $153.8 million.

The receiver for Public Service Insurance, a former writer of workers’ compensation, commercial multiperil and certain other lines of business, previously attempted to execute a loss portfolio transfer with Catalina Holdings (Bermuda) Ltd.’s SPARTA Insurance Co. When that transaction fell through, documents show, the receiver directed financial adviser Griffin Financial Group LLC to conduct a second auction. That process yielded two proposals, and the receiver concluded that the structure proposed by Premia represented the better option for avoiding an immediate liquidation of Public Service Insurance’s liabilities and maintaining the greatest value of assets in the receivership estate to settle claims of non-policyholder creditors.

Terms of the deal, according to the Aug. 26 stock purchase agreement, call for Premia to take on Public Service Insurance’s liabilities through an acquisition of all of the insurer’s outstanding stock for consideration at closing of $2.5 million with contingent consideration of an additional $4.4 million based on its success in collecting on reinsurance recoverables. Premia intends to recapitalize Public Service Insurance to a risk-based capital level of at least 300%, provide the insurer with the necessary liquidity to discharge the policyholder liabilities, extend reinsurance coverage and assume the administrative costs associated with the runoff process.

The receiver argued that the deal will “better protect the interests and expectations of policyholders” relative to an alternative scenario in which Public Service Insurance remained in rehabilitation.

Documents did not reveal the identities of the other parties that expressed interest in Public Service Insurance during the second auction process. During the first auction, the receiver previously disclosed that Armour Group, now known as Trebuchet Group Holdings Ltd., along with Enstar Group Ltd. and Sirius International Group Ltd., joined Catalina in bidding on the business.

Backed by Arch Capital Group Ltd. and Kelso & Co. LP, Premia made its first splash with the July 2017 news that Premia Reinsurance Ltd. agreed to provide up to $1.03 billion in adverse development cover to AmTrust Financial Services Inc. in exchange for $675 million in premium. Premia Re boasted total initial capitalization of $500 million; it ended 2017 with total shareholders’ equity of $517.4 million.

The new reinsurer generated $811.1 million in net premiums written and earned in 2017, according to its income statement for the year as filed with the Bermuda Monetary Authority. Kroll Bond Rating Agency said in a February rating report that the company’s level of premium volume in its first year had been “significantly over plan” and established “a solid foundation.”

In addition to the high-profile AmTrust deal, Premia Re entered a retroactive reinsurance agreement with GuideOne Mutual Insurance Co., effective Sept. 30, 2017, that provided an aggregate coverage limit of $240 million in loss and loss-adjustment-expense reserves in three specific sections, with a particular focus on the cedant’s for-profit senior living community business from accident year 2012 through the first half of accident year 2017.

GuideOne stopped providing liability coverage for senior living communities, including both for-profit and not-for-profit communities, effective July 5, 2017, later saying that the business had been “very unprofitable.” The premium paid by GuideOne totaled $181.5 million, and Premia Re said it ceded 25% of the transaction to Arch Reinsurance Ltd.

The February Kroll report showed that workers’ comp and general liability business combined to account for 83.3% of Premia Re’s booked loss reserves as of Sept. 30, 2017. Workers’ comp accounted for 78.7% of the Public Service Insurance net reserves subject to the transaction. The company blamed four years of significant adverse reserve development in the years leading up to its rehabilitation in part on its business in the California market, where it had grown quickly between 2008 and 2013. It was placed in rehabilitation in March 2017.

Meanwhile, Premia recently enhanced the scope of its capabilities by buying Boston-based international claims, audit and risk management advisory firm Alan Gray LLC. The company said upon announcing that deal on Sept. 12 that it is “well-equipped” to handle acquisitions and reinsurance transactions in the global runoff market.

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Premia Holdings Ltd. Chief Executive Officer Bill O’Farrell has hailed the company’s ability to “quickly and quietly deliver” on complex reinsurance transactions, such as the loss development reinsurance agreement the company completed with AmTrust recently.

Premia Re was founded in January as a start-up Bermuda-based property & casualty insurance and reinsurance run-off group, with a $510 million initial capital raise and backing from Arch Capital and Kelso & Company.

Premia Re has clearly been working on the AmTrust transaction (which we covered last week here) for some time, given the scale of the deal, providing the insurer with a reinsurance agreement covering its first quarter 2017 and prior net reserves.

Premia will provide adverse loss development coverage of up to $400 million in excess of carried net reserves as of March 31, 2017, plus assume an additional $625 million of carried net reserves

HAMILTON, Bermuda–(BUSINESS WIRE)–Premia Holdings Ltd. announced today that one of its wholly-owned subsidiaries, Premia Reinsurance Limited (“Premia Re”), has entered into an agreement to reinsure AmTrust Financial Services, Inc. (“AmTrust”) with respect to its first quarter 2017 and prior net reserves.

Premia Re will assume net reserves of $625 million in excess of approximately $5.96 billion in net reserves and provide $400 million of additional coverage in excess of AmTrust’s net carried reserves of approximately $6.59 billion as of March 31, 2017. Premia Re will post the reinsurance premium as collateral in trust and will provide additional collateral protections to AmTrust in connection with this transaction.

Commenting on the successful transaction, Premia Holdings Ltd. Chief Executive Officer William E. O’Farrell noted, “This significant transaction highlights our ability to quickly and quietly deliver tailored solutions to our clients for large and complex matters. We welcomed the opportunity to work with AmTrust on this important reinsurance agreement and look forward to a successful ongoing relationship with the Company.”

About Premia

Premia Holdings Ltd. is a Bermuda-based reinsurance group focused on reinsuring insurance and reinsurance portfolios and acquiring companies in runoff around the world. Premia currently has operations in Bermuda and the United States. Premia Holdings is majority owned by funds controlled by Kelso & Company and its co-investment partners. Arch Capital Group Ltd., through its subsidiaries, is a minority shareholder in Premia and a strategic reinsurance partner.

Cautionary Statement

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This release or any other written or oral statements made by or on behalf of Premia Holdings Ltd. and its subsidiaries may include forward-looking statements, which reflect our current views with respect to future events and financial performance. All statements other than statements of historical fact included in or incorporated by reference in this release are forward-looking statements.

Forward-looking statements can generally be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue” or their negative or variations or similar terminology. Forward-looking statements involve our current assessment of risks and uncertainties. Actual events and results may differ materially from those expressed or implied in these statements.

All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contacts

Premia Holdings Ltd.
Scott Maries, 441-278-9176
Chief Financial Officer
smaries@premiareltd.com

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