LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Ecclesiastical Insurance Office plc (EIO) (United Kingdom). At the same time, A.M. Best has affirmed the Long-Term Issue Credit Rating of “bbb” on GBP 106,450,000, 8.625% non-cumulative irredeemable preference shares issued by EIO. The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect EIO’s balance sheet strength, which A.M. Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
EIO’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation, which, as measured by Best’s Capital Adequacy Ratio (BCAR), is at the strongest level. The company has a good liquidity profile, with fixed-income securities and equities accounting for the majority of its investment portfolio. EIO has a record of good operating profitability, and prospective capital adequacy is expected to benefit from a good level of internal capital generation. In 2017, EIO’s pre-tax profits increased by 32% from the prior year to GBP 82 million, driven by the improved profitability of its underwriting and investment operations. Going forward, A.M. Best expects EIO to achieve a return on equity broadly in line with its five-year average of 10% (2013-2017).
EIO has a specialist business profile in the U.K.’s not-for-profit insurance segment, where it maintains a strong competitive position. Offsetting rating factors include the geographical concentration of the company’s insurance portfolio in the U.K. and Ireland. Following three years of decline due to actions taken to reduce unprofitable business, gross written premiums increased in 2016 and 2017. A.M. Best expects the company’s insurance portfolio to continue to grow gradually over the medium term. EIO’s ERM framework is well-developed, and its risk management capabilities are aligned appropriately with its risk profile.
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