A.M. Best Affirms Rating of Credit & General Insurance Limited.OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of Credit & General Insurance Limited (CGIL CGIL Confederazione Generale Italiana del Lavoro (Italian General Confederation of Labor) ) (New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. ). The rating outlook is stable. The rating reflects CGIL's excellent and consistent underwriting and operating performance, prudent risk-adjusted capitalization and strong balance sheet liquidity. The rating also considers CGIL's distribution arrangement with the Farmers retail chain (Farmers), one of the largest retail department stores This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble department stores. in New Zealand. Fisher and Paykel Appliances Holdings (F&P) acquired Farmers' finance business in late 2003; CGIL maintains its distribution capacity through a 20-year exclusive right distribution arrangement with Farmers. In spite of the change of ownership structure, CGIL, as a member of F&P, maintains its premium growth momentum, recording a growth of 6% in 2004. CGIL's underwriting performance has been consistent for the past several years. Its average loss ratio over the past five years stands at 13.4%, reflecting its disciplined underwriting practices and excellent quality of the business it derives from Farmers. A low level of claims experience, along with a stable investment yield has resulted in a consistent stream of operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before . A high level of retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. contributed to the significant increase in CGIL's capital and surplus in 2004. Its adjusted capital and surplus grew by 36.3% in 2004, compared to 14% in the previous year. The Best's Capital Adequacy Ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. , which measures capitalization on a risk-adjusted basis, indicates that the company was strongly capitalized in 2004. In addition, CGIL's liquidity position remains strong as cash and deposits represented more than 86% of the company's total assets as of March 31, 2005. Offsetting factors include CGIL's significant concentration of business risk, heavy reliance upon Farmers as its risk product distributor and vulnerability to the potential fluctuation in the lending activities in New Zealand's consumer credit market. As a result of its reliance upon Farmers as its core distribution channel, CGIL's premium growth will be associated with the future operating performance of Farmers, of which F&P has no stake. A.M. Best remains cautious about CGIL's exposure to the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of the consumer credit and loan market in New Zealand and the impact on the stability of CGIL's operating results given its high level of business concentration on the consumer credit insurance line. For Best's Ratings Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. , an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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