A.M. Best Assigns Ratings to Pacific International Insurance Limited.OLDWICK, N.J. -- A.M. Best Co. has assigned a financial strength rating of B+ (Very Good) and an issuer credit rating of "bbb-" to Pacific International Insurance Limited (PII See Pentium II. ) (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 PII's profitable operations, improving 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. and relatively conservative reserving. A.M. Best believes that PII's 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. discipline and relatively conservative investment strategy will contribute to the company's financial stability. PII has had a short but profitable history. Apart from the loss in the first year of operations in 2002, operations to date have contributed to shareholder surplus. Return on equity was 58% in fiscal year 2005. Loss ratios have declined substantially since inception; however, A.M. Best expects losses to increase as the book matures. Expenses have been increasing but are expected to stabilize at the current levels. The combined ratio was 75% in 2005. PII'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. , improved significantly in 2005. This was due primarily to significant strengthening of capital and surplus. PII's risk-adjusted capitalization is expected to strengthen considerably in 2006 due to strong earnings and the release of reserves. The stability of the assigned ratings is contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent PII meeting profitability and capitalization forecasts. The company had a liquid and relatively conservative investment portfolio in 2005, with approximately 63% of assets invested in cash. The investment income ratio was 10.7% in fiscal year 2005 compared to 6.8% in fiscal year 2004. Partially offsetting these positive factors are PII's exposure in the event of large claims, short operating history and relatively small underwriting book. PII's 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. is structured on an excess of loss basis, with a relatively high retention per claim. Although highly unlikely, significant negative developments could potentially affect PII's financial stability. A.M. Best gains comfort from the fact that historical large losses have not been significant enough to trigger reinsurance claims. PII's operating performance remains uncertain as a result of its short operating history. Further, the company's small underwriting book could result in volatile underwriting profitability. PII's current conservative loss reserving methodology somewhat mitigates these concerns. As such, A.M. Best views the ongoing adequacy of reserves as crucial. 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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