Citadel eyes larger lines with major capital raise after ‘tough’ year

Reinsurance carrier Citadel Risk has unveiled a major capital investment and balance sheet improvement after what its chief executive  Tony Weller described as a “tough” year, having faced rating downgrades and problems affecting its subsidiary AMIC. The new capital will be used to expand into large business lines and develop a more diverse insurance entity.

The capital changes have been made to two of its subsidiaries Citadel Reinsurance Company Bermuda and American Millennium Insurance Company (AMIC) balance sheets via three separate arrangements. AMIC was downgraded by AM Best in February to C- from C++ following persistent heavy losses and negatively impacted risk-adjusted capitalisation.

The company has said that $25 million has now been injected into Citadel’s balance sheet which at 30 September 2021 stood at $47.1 million. A further $10 million has been injected into AMIC’s balance sheet which at 30 September 2021 stood at $21.9 million.

Additionally, a reinsurance stop loss has been put in place to “cap” the AMIC losses which led to the rating downgrade in February 2021.

Citadel reported that its consolidated pre-tax profit for the six months to 30 June 2021 was $2.5 million, and consolidated surplus at year-end 2021 will be approximately $55 million, with an additional $20 million expected in early 2022.

“It has been a tough year for Citadel, and I am extremely pleased to announce this major investment and financial strengthening of the Group’s balance sheet,” said Weller. “The enhanced capital base will allow us to write larger lines and develop AMIC into a wider and more diverse insurance entity.

“The Group will be preparing new submissions for an immediate rerating with AM Best, and the enhanced capital structure will be a positive uplift.

“I sincerely thank all our clients and partners for their support during a difficult time and look forward to working with them to explore many new opportunities.”