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FOR IMMEDIATE RELEASE
LONDON - MARCH 21, 2017 11:36 AM (EDT)
A.M. 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, A.M. 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 excellent risk-adjusted capitalisation and established specialist business profile within the not-for-profit sector of the U.K. market. The ratings also consider the improvement in EIO’s underwriting performance achieved over the past three years (2014-2016).
EIO has reported underwriting profits in each year since 2014. This follows four years of underwriting losses (2010-2013). The return to technical profitability reflects remedial actions taken by management, which included exiting or reducing exposure to non-performing lines. A.M. Best expects profitable underwriting performance to be maintained, enabling an improved balance of earnings and a reduced dependence on investment income to achieve overall operating profitability.
The company’s risk-adjusted capitalisation remained excellent in 2016. Capital adequacy continues to benefit from good internal capital generation and a comprehensive reinsurance programme. EIO’s relatively high exposure to equities, which represent 26% of the company’s total investments at year-end 2016, remains a source of potential volatility for earnings and capitalisation. A.M. Best expects prospective risk-adjusted capitalisation to remain strong, despite the expectation of underwriting growth over the next three years that is anticipated to increase capital consumption.
EIO has a specialist business profile in the not-for-profit segment of the market, writing a portfolio of mainly U.K. commercial property and liability risks. Overall premium income trended downward in the years leading up to 2015, as the company exited non-core and under-performing lines of business. However, the company maintains a good competitive position in its niche markets, with its profile expected to grow gradually over the next three years. EIO benefits from its long-standing relationships with clients and specialist expertise in insuring churches, heritage buildings and independent schools.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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