A.M. Best Affirms Rating of Pioneer Insurance Company Limited; Assigns Issuer Credit Rating.OLDWICK, N.J. -- A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the financial strength rating of B+ (Very Good) of Pioneer Insurance Company Limited (Pioneer) (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. ) and revised the outlook to negative from stable. Concurrently, A.M. Best has assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. an issuer credit rating of "bbb-" to Pioneer and assigned a negative outlook. The outlook reflects A.M. Best's opinion of the negative impact on Pioneer's business position due to the pressures arising from the weak risk-adjusted capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. to support the expected growth, coupled with deteriorated underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. profitability for the fiscal year-end Fiscal Year-End The completion of a one-year, or 12-month, accounting period. Notes: The reason that a company's fiscal year often differs from the calendar year and does not close on Dec 31, is due to the nature of company's needs. March 2006. The rating also factors A.M. Best's view of Pioneer's lower prospective earnings. Despite the strong premium development over the past two years, Pioneer delivered unfavorable underwriting results in fiscal year 2006. The company recorded a net underwriting loss. Both the loss ratio and expense ratio deteriorated with a combined ratio of about 100%. The substantial increase of the expense ratio has exerted pressure on the underwriting margin. The deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. of the underwriting performance may diminish Pioneer's prospective business position. As a new start-up, the company's risk-based capitalization remains weak due to the aggressive business growth. Going forward, Pioneer must strengthen its capital position to support business growth. Apart from the pressure on the risk-based capitalization and underwriting performance, the aggressive premium growth also caused strain in Pioneer's operational capacity, such as accounting and administrative issues in the distribution channel's management. A.M. Best recognized the continued efforts of Pioneer's management in turning around the situation and developing a profitable portfolio. It is challenging yet necessary for Pioneer to strengthen its internal control and monitoring system prior to further growing its portfolio. While the prospective results may be negatively influenced by the operating performance, A.M. Best remains cautious of Pioneer's growth as any aggressive business growth could put further strain on the company's risk-based capitalization and its rating stability. 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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