Iron Horse Insurance Co., Traders Insurance Ltd. Ratings On CreditWatch Negative After Chevron Acquisition Of Anadarko


  • Chevron Corp. has agreed to acquire Anadarko for $33 billion, $50 billion including the assumption of debt.
  • The CreditWatch listing reflects the potential for an affirmation or a downgrade of Chevron following the close of its acquisition of Anadarko.
NEW YORK (S&P Global Ratings) April 17, 2019--S&P Global Ratings said today it placed its 'AA-' long-term issuer credit and insurer financial strength ratings on U.S.-domiciled Iron Horse Insurance Co. and Bermuda-domiciled Traders Insurance Ltd. on CreditWatch Negative.
The CreditWatch placement reflects the possibility that we could lower our issuer credit ratings on Chevron when the Andarko Petroleum Corp. acquisition closes, due to debt leverage above our expectations.
The ratings on Iron Horse and Traders reflect our view that the companies are highly strategic subsidiaries to Chevron. Our ratings on highly strategic subsidiaries are typically one notch below the group credit profile of the parent. We view the captives as an integral part of the group's financial and risk-management structure, playing significant roles in the group's global risk-retention strategy. Partly offsetting these strengths are its relatively volatile operating performance and weak capital adequacy.
Wholly owned subsidiaries Iron Horse and Traders provide property, construction, liability, marine cargo, and marine hull coverage in support of the group's core activities. Bermuda-domiciled captive Traders was reactivated in 2018 to write Chevron's international risks previously written out of Iron Horse. Due to the nature of the captives' risk profile, they are exposed to low-frequency but high-severity losses. However, in the event of a large loss or aggregation of smaller losses, we believe the parent will provide additional capital support as needed to meet regulatory minimum standards.
The negative CreditWatch listing reflects the potential for an affirmation or a downgrade of Chevron following the close of its acquisition of Anadarko. We expect to resolve the CreditWatch around the close of the acquisition. Additionally, we believe both captives will continue to qualify as highly strategic subsidiaries under our rating criteria. We expect any changes in outlook or ratings on the captives to be tied to rating actions on Chevron.
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