HONG KONG--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Ansvar Insurance Limited (Ansvar) (Australia). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Ansvar’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The balance sheet strength assessment mainly reflects Ansvar’s low business net retention and moderate underwriting leverage. In addition, while the company’s investment portfolio continues to be invested in cash and high-grade fixed-interest securities, the average duration of its bond portfolio and net claims liabilities is very well-matched. Given Ansvar’s modest capital size, its exposure to property/casualty risks that carry relatively high policy limits represents a major risk factor. Nevertheless, this risk is mitigated partially by an appropriate reinsurance program that has very conservative levels of retention limits.
In response to poor underwriting results from 2010 to 2012, Ansvar exited its unprofitable personal lines business and implemented various measures to remediate the performance of its commercial book. Despite a reduced revenue base following these remedial actions, the company has consistently generated operating profits over the past five years, driven mainly by a steady stream of investment income and a stable net claims ratio of approximately 50%. Similar to a number of its peers, the company’s high expense ratio has been the major overhang on operating performance. Nevertheless, A.M. Best believes that, as Ansvar continues to focus on strong customer retention and pursues profitable growth of its niche businesses, its operating results will remain positive and gradually improve over time.
Ansvar is a niche insurer that underwrites general insurance products for its target customer groups in Australia, which includes faith, community service organizations, care, education, and property owners including heritage. Its core product offerings are property insurance, liability insurance (including financial lines insurance) and accident covers. While Ansvar has a long-established presence in some niche segments, A.M. Best believes this advantage is offset somewhat by the company’s limited control over distribution and a reliance on the non-affiliated broker channel to distribute its products.
Given its status as a stable operator within a niche segment, Ansvar’s risk profile shows high business concentration risk. Nevertheless, A.M. Best considers Ansvar’s risk management capabilities to be aligned appropriately with its risk profile. This is underpinned by the company’s strict underwriting controls, prudent reserving and low business retention, as well as by various strategic initiatives to develop new business opportunities within its target customer groups.
The stable outlooks reflect A.M. Best’s expectation that Ansvar will maintain positive operating results, supported by stable revenue growth, steady claims ratios and an expense ratio that is expected to decline gradually over time. Negative rating actions could occur if Ansvar fails to meet its profitability targets due to competitive pressures, or if there are material adverse deviations from the budgeted loss and expense ratios.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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