LONDON--(BUSINESS WIRE)--A.M. Best Europe – Rating Services Limited has affirmed the financial strength ratings of A- (Excellent) and issuer credit ratings of “a-” of London General Insurance Company Limited (LGI) and London General Life Company Limited (LGL) (both domiciled in the United Kingdom). The outlook remains stable for all ratings.
Despite challenging trading conditions, both LGI and LGL are likely to maintain excellent risk-adjusted capitalisation in 2011. A small reduction in LGI’s shareholders’ funds, following the projected payment of ordinary and preference dividends, is expected to be partly offset by a reduction in credit risk due to an increase in the number and quantum of letters of credit and trust arrangements used to mitigate reinsurer default risk. LGL is expected to maintain excellent risk-adjusted capitalization supported by continued profitability and a reduction in underwriting risk.
LGI is expected to report a good underwriting result in 2011, principally driven by the strong performance of its core warranty business. The company achieved an excellent technical profit of approximately GBP 19 million in 2010 (2009: GBP 14.0 million). The result benefited from reserve releases due to better claims experience on recession-affected lines such as creditor and unemployment policies.
LGL’s technical earnings are expected to improve in 2011, on the GBP 1.4 million achieved in the previous year, as a result of a further release from its long-term business provision. Performance in 2010 was supported by earnings from profitable multi-year contracts written in prior years and a reduction in the long-term business provision.
LGI and LGL are expected to maintain a good specialist profile in the UK, Ireland and Europe. The companies share a broad client base, and their combined underwriting portfolio includes extended warranty, accidental damage and creditor insurance. The net premium income of LGI is expected to increase in 2011 due to a number of new large warranty contracts. In contrast, net premium written by LGL is likely to reduce mainly due to weak economic conditions in the UK and Europe and a resultant reduction in demand for consumer loans.
The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Understanding BCAR for Life and Health Insurers”; and “Rating Members of Insurance Groups”. Methodologies 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.
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