A.M. Best affirms ratings of New Zealand local government insurance corporation limited (Civic Assurance)
Oldwick, N.J. (BUSINESS WIRE) - A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of "a" of New Zealand Local Government Insurance Corporation Limited (Civic Assurance) (New Zealand).
The outlook for both ratings is stable.
The rating affirmations reflect Civic Assurance's solid risk-based capitalization, continued operating profitability and strong liquidity. The ratings also acknowledge the company's unique market position in the local government authorities sector.
Continued softening in premium rates due to competition and unfavorable claims experience has exacerbated Civic Assurance's underwriting margin, leading to an increase in net loss ratio from 36.0% in 2006 to 52.6% in 2007. Nonetheless, with a combined ratio of approximately 83.6%, the company produced a positive underwriting profit of NZD 200,000 (USD 155,000) in 2007.
With approximately 43% of invested assets held in cash and New Zealand government bonds, Civic Assurance maintains strong liquidity in response to the short-tailed nature of its insurance liabilities. Return from the fixed income and property-oriented portfolio has enabled the company to generate an overall return on equity of approximately 10.4% in 2007, offsetting the deterioration in loss experience.
Civic Assurance's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio, remained strong in fiscal year 2007, although a further increase in premium retention in 2007 led to a higher level of underwriting risk. The company further strengthened its surplus by 6.1% to NZD 19.2 million (USD 14.9 million) in 2007. Consistent surplus growth has allowed Civic Assurance to maintain its underwriting leverage at a prudent level over the past five years. In view of the company's underwriting discipline and capital management philosophy, A.M. Best anticipates Civic Assurance will maintain adequate capitalization through retained earnings to support the higher level of underwriting risk inherent within its commercial risk oriented book of businesses.
Partially offsetting rating factors include the ongoing soft market environment, potential volatility associated with the increase in underwriting risk exposure and the limited long-term growth potential in Civic Assurance's designated market.
Ongoing soft market conditions and intensifying competition, particularly in the commercial risk segment, are expected to challenge Civic Assurance's underwriting profitability in the near term. Additionally, because of the company's niche underwriting focus on the local government and public sectors, its premium growth over the long term might be limited.
The increase in underwriting risk exposure resulting from the change in reinsurance coverage could translate into a higher degree of volatility in underwriting profitability for Civic Assurance, although its capitalization remained solid to absorb potential loss from adverse claims experience. A.M. Best will continue to monitor loss development of Civic Assurance's insurance book after the change in the reinsurance coverage.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.
For more information, visit www.ambest.com.
A.M. Best Co.
Analysts:Billy Wong, +852-2827-3414 billy.wong@ambest.com
Terrence Wong, +852-2827-3403 terrence.wong@ambest.com
or Public Relations:Jim Peavy,+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com
Oldwick, N.J. (BUSINESS WIRE) - A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of "a" of New Zealand Local Government Insurance Corporation Limited (Civic Assurance) (New Zealand).
The outlook for both ratings is stable.
The rating affirmations reflect Civic Assurance's solid risk-based capitalization, continued operating profitability and strong liquidity. The ratings also acknowledge the company's unique market position in the local government authorities sector.
Continued softening in premium rates due to competition and unfavorable claims experience has exacerbated Civic Assurance's underwriting margin, leading to an increase in net loss ratio from 36.0% in 2006 to 52.6% in 2007. Nonetheless, with a combined ratio of approximately 83.6%, the company produced a positive underwriting profit of NZD 200,000 (USD 155,000) in 2007.
With approximately 43% of invested assets held in cash and New Zealand government bonds, Civic Assurance maintains strong liquidity in response to the short-tailed nature of its insurance liabilities. Return from the fixed income and property-oriented portfolio has enabled the company to generate an overall return on equity of approximately 10.4% in 2007, offsetting the deterioration in loss experience.
Civic Assurance's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio, remained strong in fiscal year 2007, although a further increase in premium retention in 2007 led to a higher level of underwriting risk. The company further strengthened its surplus by 6.1% to NZD 19.2 million (USD 14.9 million) in 2007. Consistent surplus growth has allowed Civic Assurance to maintain its underwriting leverage at a prudent level over the past five years. In view of the company's underwriting discipline and capital management philosophy, A.M. Best anticipates Civic Assurance will maintain adequate capitalization through retained earnings to support the higher level of underwriting risk inherent within its commercial risk oriented book of businesses.
Partially offsetting rating factors include the ongoing soft market environment, potential volatility associated with the increase in underwriting risk exposure and the limited long-term growth potential in Civic Assurance's designated market.
Ongoing soft market conditions and intensifying competition, particularly in the commercial risk segment, are expected to challenge Civic Assurance's underwriting profitability in the near term. Additionally, because of the company's niche underwriting focus on the local government and public sectors, its premium growth over the long term might be limited.
The increase in underwriting risk exposure resulting from the change in reinsurance coverage could translate into a higher degree of volatility in underwriting profitability for Civic Assurance, although its capitalization remained solid to absorb potential loss from adverse claims experience. A.M. Best will continue to monitor loss development of Civic Assurance's insurance book after the change in the reinsurance coverage.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.
For more information, visit www.ambest.com.
A.M. Best Co.
Analysts:Billy Wong, +852-2827-3414 billy.wong@ambest.com
Terrence Wong, +852-2827-3403 terrence.wong@ambest.com
or Public Relations:Jim Peavy,+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com
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