A.M. Best Affirms Ratings of Ansvar Insurance Limited.OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Ansvar Insurance Limited (Ansvar) (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 outlook for both ratings is stable. The ratings reflect Ansvar's strong risk-adjusted capitalization, consistent operating profitability and prudent investment strategy. The ratings also acknowledge the company's strong presence in the niche markets A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. of faith, education and community care groups in New Zealand, primarily focusing on its commercial portfolio. Ansvar's risk-adjusted capitalization, as measured by 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. , increased in 2007. This improvement was supported by the company's conservative 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. leverage and consistent high retention 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 . The company's net premium leverage improved to 0.68 times in 2007 from 0.80 times in 2006 due primarily to lower premium risk retention. Prospectively, higher premium accumulation is expected to gradually weaken the company's risk-adjusted capitalization. Nevertheless, A.M. Best believes that Ansvar will maintain a level of capitalization that will be supportive of its rating. Ansvar has been consistently profitable over the past decade. Notwithstanding the deterioration in underwriting performance, with the combined ratio increasing to 108% in 2007 from 96% in 2006, the company's operating ratio Operating Ratio A ratio that shows the efficiency of management by comparing operating expense to net sales: was 93.0% in 2007 and averaged 79.4% over the past five years, due predominately to unanticipated large losses and a soft market condition. Ansvar's investment yield for 2007 was 8.1%, reflecting its conservative investment portfolio mix. Approximately 53.5% of invested assets were New Zealand government bonds, 16.1% were highly rated corporate bonds and the remaining 29.2% were cash and short-term deposits. Offsetting rating factors include weakening underwriting performance and the company's catastrophe exposure. In 2007, net earnings slightly declined to NZD NZD In currencies, this is the abbreviation for the New Zealand Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 0.34 million (USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 0.26 million) from NZD 0.83 million (USD 0.58 million) in 2006. Ansvar's weakening underwriting profitability in 2007 was primarily due to a higher incidence of unfavorable losses and a persistent soft market condition in the commercial and personal lines of business. The loss ratio increased to 71% in 2007, compared to 67% in 2006 and 58% in 2005. Although Ansvar recorded a similar level of loss experience in the first half of 2008, A.M. Best believes its underwriting profitability will improve due to the soft rating cycle having turned and the resulting higher premium accumulation in the near term. As with other non-life insurers in New Zealand, Ansvar is exposed to catastrophic perils. In 2007, weather-related losses had partially contributed to the decline in the company's underwriting profitability. Nonetheless, Ansvar is reasonably protected by its reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. arrangements with a panel of high quality of reinsurers. 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. |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion