LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a” of Ecclesiastical Insurance Office plc (EIO) (United Kingdom). At the same time, A.M. Best has affirmed the debt rating of “bbb” on GBP 106,450,000, 8.625% non-cumulative irredeemable preference shares issued by EIO. The outlook for all ratings remains stable.
The ratings of EIO reflect its excellent risk-adjusted capitalisation and its established specialist business profile within the not-for-profit sector of the UK market. The ratings also consider actions taken by the company to improve technical performance.
EIO is expected to achieve a solid pre-tax profit in 2014, underpinned by a good underwriting result. A combined ratio between 95%-100% is anticipated, which compares favourably with a five-year annual average of 103% (2009-2013). In recent years, EIO has taken a number of actions to improve its technical performance, including exiting a number of underperforming lines and reducing its overall catastrophe exposure. These measures are expected to produce a sustained improvement in its underwriting results, reducing the company’s dependence on investment earnings to produce an overall operating profit.
EIO’s excellent risk-adjusted capitalisation has been supported by generally positive, albeit volatile, operating earnings in recent years. In addition, there has been a reduction in underwriting risk, as the company has exited certain unprofitable lines. However, exposure to market risk is high relative to peers, due to the large proportion of equities in the company’s investment portfolio (year-end 2013: 27%).
Positive movements on the ratings of EIO are unlikely in the near to medium term. Negative rating actions could occur if the improvement in underwriting performance is not sustained. In addition, a decline in risk-adjusted capitalisation or material deterioration in the company’s business profile could result in negative rating actions.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilised:
- Catastrophe Analysis in A.M. Best Ratings
- Insurance Holding Company and Debt Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for Property/Casualty Insurers
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.
This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.
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