Fitch Ratings Affirms AEGIS 'A+' IFS Rating.Business Editors CHICAGO--(BUSINESS WIRE)--Feb. 2, 2004 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. 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 'A+' insurer financial strength (IFS) rating of Associated Electric & Gas Insurance Services Limited (AEGIS). The Rating Outlook is Stable. The strong rating of AEGIS reflects the company's leading market position, favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. capitalization profile, and high member retention rate. Weighted against these positives are 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. volatility inherent in the company's book of business, low profitability, and concentration risk in the energy market. AEGIS has built a reputation in the utility and related energy industry for consistently providing coverage and services in both hard and soft markets. This reputation has been tested through various crises in the energy and insurance industries. As a result, the company has been rewarded with high market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" and a high member retention rate. AEGIS' strong position in its market niche is viewed as a positive though a lack of diversification may expose the company more too industry-specific issues relative to more diversified carriers. Fitch believes that AEGIS has a strong capital position as evidenced by its low operating leverage Operating Leverage A measurement of the degree to which a firm or project relies on fixed rather than variable costs. Notes: The higher the degree of operating leverage, the greater the potential danger from forecasting risk. and favorable level of surplus. This, in conjunction with AEGIS' strong market niche, is viewed by Fitch as key factors supporting the rating, given that the company has exposures that are inherently volatile. AEGIS' strategy as a mutual insurance company owned by its policyholders is to primarily focus on client retention and service to members, and to a lesser degree on underwriting profitability. This, in conjunction with the long-tail nature of its business and low frequency/high severity loss profile, results in underwriting results that are overall more volatile and less favorable relative to other commercial lines writers. However, AEGIS' operating strategy also contemplates favorable investment results to offset underwriting losses and produce favorable operating ratios Operating Ratio A ratio that shows the efficiency of management by comparing operating expense to net sales: . AEGIS is inherently limited in its ability to diversify across industries. However, the company continues to increase its diversification within the utility and energy business by geography, including a Lloyd's syndicate, and lines of business, with both liability and property coverages. Entity/Issue/Type Action Rating/Outlook Associated Electric & Gas Insurance Services Limited -- Insurer financial strength Affirm To ratify, establish, or reassert. To make a solemn and formal declaration, as a substitute for an oath, that the statements contained in an Affidavit are true or that a witness will tell the truth. 'A+'/Stable. |
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