2014-02-13 17:08:01 -
A.M. Best has affirmed the financial strength rating of A (Excellent) and issuer credit rating (ICR) 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 specialist business profile within the not-for-profit sector of the UK market. These positive rating factors are partially offset by the company’s underwriting operations, which have generated losses since 2010. Underwriting performance has been particularly impacted by a number of catastrophe losses and more recently, increased claims frequency/severity on certain liability lines. This is
reflected in a five-year average combined ratio of 102%.
Although underwriting performance is a negative rating factor, A.M. Best views positively the remedial steps that the company is taking to return its underwriting operations to a profitable position. These actions include exiting a number of non-performing lines, increasing premium rates on loss-affected policies and reducing overall catastrophe exposure. A.M. Best expects these actions to lead to a positive underwriting result for 2014.
The company’s risk-adjusted capitalisation remains excellent and is a positive rating factor. In recent years, risk-adjusted capitalisation has been bolstered by retained earnings and an overall reduction in premium risk, following the company’s withdrawal from certain unprofitable lines.
EIO generated a strong operating profit for 2012 and is expected to report a further improved result for 2013, despite losses from underwriting operations. The company’s operating performance is largely the result of strong investment returns, driven by its above average exposure to equities, which have seen significant gains over the period.
EIO’s investment portfolio, however, remains inherently volatile, with future investment returns largely dependent on the performance of UK and European equity markets.
A positive movement on the ratings of EIO is unlikely in the near to medium term. Negative rating actions could occur if the company’s remedial actions on the underwriting account fail to improve performance in line with A.M. Best’s expectations. A significant decline in risk-adjusted capitalisation or substantial deterioration in operating performance could also 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 : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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 : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
This rating announcement has been issued by A.M. Best Europe – Rating Services Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com : cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww ..
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