AMSTERDAM--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Fortegra Europe Insurance Company Limited (FEI) (Malta). FEI is a Malta-incorporated start-up subsidiary of Fortegra Financial Corporation (FFC) group, a U.S. insurance group specialising in program underwriting for credit, warranty, auto, home and other property/casualty business. FEI was established to write warranty and specialty motor insurance business in several European markets. The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect FEI’s balance sheet strength, which AM Best categorises as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. The ratings also reflect FEI’s strategic importance to the group, and the track record of financial and operational support from FFC.
FEI’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which AM Best expects to remain at the strongest level as at year-end 2019, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects the company’s BCAR to weaken to the very strong level in subsequent years, as it grows and assumes additional underwriting risk. Nevertheless, AM Best expects FEI’s balance sheet strength to remain strong prospectively, supported by a conservative investment portfolio, good liquidity and further capital contributions from FFC during the start-up phase.
Following a marginal operating loss reported in 2018, FEI’s first year of operation, the company generated a profit of USD 0.7 million in the first three quarters of 2019. Third-quarter 2019 results are underpinned by robust underwriting profits and supplemented by moderate investment returns. AM Best expects FEI to continue to generate profitable technical results, supported by local and group underwriting expertise.
As a start-up company, FEI’s portfolio is small and has limited diversification by product line and geography; underwriting exposure is concentrated in automotive guaranteed asset protection insurance in the United Kingdom. During the first three quarters of 2019, FEI accelerated its growth relative to its original business plan following the unforeseen exit of a key market player. Going forward, premium growth is expected to stabilise, as the company has capitalised on this business opportunity. FEI uses third-party administrators and brokers to distribute its products. FEI’s significant reliance on a number of outsourcing partners represents a source of risk, which it aims to mitigate through careful selection, management and monitoring.
FEI’s ratings benefit from the support of its parent, FFC. FEI plays a strategically important role in expanding the operations of FFC into Europe. FEI shares branding and management with its parent. FFC’s support is demonstrated by recent capital contributions to FEI, and the expectation that it will provide further capital to support the company during the five-year start-up phase.
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