LONDON--(BUSINESS WIRE)--AM 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, AM 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 AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
EIO’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation that AM Best expects to remain at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by good internal capital generation. The company maintains a good liquidity profile. Although a relatively high allocation to equity investments exposes EIO’s risk-adjusted capitalisation to financial market volatility, capital buffers are considered sufficient to absorb financial market shocks.
EIO has a track record of adequate operating profits, as demonstrated by a five year (2014-2019) weighted average return on equity of 8.7%, with technical results supported by generally positive investment earnings. In 2019, the company reported a pre-tax profit of GBP 73 million (2018: GBP 15 million), primarily driven by fair-value gains on investments reaching a five-year high of GBP 40 million. Prospectively, AM Best expects EIO to produce robust returns on equity, although these will be subject to potential volatility due to the company’s investment allocation.
EIO has a specialist business profile offering insurance products and risk management services in the faith, heritage, charity, education and real estate markets, where it maintains a strong competitive position. Offsetting rating factors include the geographical concentration of the company’s insurance portfolio in the United Kingdom and Ireland. Following a downward trend observed in 2013-2015, gross written premiums increased for a fourth consecutive year to GBP 394 million in 2019. AM Best expects the company’s premium to continue to increase gradually.
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