A.M. Best Co. announced that it has affirmed the financial strength rating of “A-” (Excellent) of the U.K.’s Ecclesiastical Insurance Office plc (EIO) with a stable outlook
“The rating reflects EIO’s excellent risk-adjusted capitalisation, improved operating performance and excellent business profile. An offsetting factor continues to be the company’s high exposure to equities,” said Best.
The rating agency said it “believes that EIO’s risk-adjusted capitalisation is likely to be maintained at an excellent level in 2004 and 2005. The rating recognises EIO’s improved operating performance, with the combined ratio likely to remain below 100 percent for the next two years, although it is expected to deteriorate from 90.7 percent in 2003 when claims experience was particularly benign.”
Best also “expects net investment income to remain stable in 2004 following the improvement in 2003, which resulted in an unrealised gain of GBP 19.6 million (USD 34.9 million).”
Best indicated that “EIO has maintained its strong business profile in the niche church and charity insurance sectors. Its consistently high retention rates of over 90 percent in its core portfolios help reduce price-related competition and demonstrate the benefits of the company’s customer-related focus. EIO also benefits from high penetration rates in other specialist areas such as independent schools and care homes, and has successfully developed its commercial portfolio, which now accounts for 35 percent of gross premium income.”
However, Best warned: “The continued high exposure to equities remains an offsetting factor, and A.M. Best believes this is unlikely to be reduced in the near future. In 2003, equities accounted for 29 percent of total investments. As a result, the potential remains for volatility in future earnings.”
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