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FOR IMMEDIATE RELEASE
HONG KONG - APRIL 22, 2010 01:30 PM (EDT)
A.M. Best Co. has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of "bbb-" of Pacific International Insurance Limited (PII) (New Zealand). The outlook for both ratings is positive.
The ratings reflect PII's strong risk-adjusted capitalization, consistent operating profitability and its ongoing efforts in enhancing its corporate governance.
PII's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), remained strong in 2009, despite being slightly lower than the previous year. The decline in risk-adjusted capitalization reflects a strengthening of reserves. The BCAR is projected to strengthen moderately in fiscal year 2010.
The company's operating profitability was supported by a stable stream of investment income, which offset the deterioration in underwriting performance. The consistency in operating profitability and high retention of earnings corresponded to strong surplus accumulation over the last five years.
PII has put effort in enhancing its corporate governance and risk management practices in recent years and is currently subject to the oversight of the Australian insurance regulator. These initiatives are expected to continue as PII grows and rationalizes its corporate structure.
Partially offsetting these positive rating factors is the deterioration in underwriting performance, short operating history and relatively small underwriting book of business.
PII's underwriting loss for fiscal year 2009 declined to AUD 346,000, from an underwriting profit of AUD 427,000 in fiscal year 2008 and NZD 2.6 million in fiscal year 2007, due to adverse claims experience and the strengthening of reserves from prior underwriting years. PII's underwriting margin has been pressured by higher claims from its indemnity business, while its expense ratio increased moderately. Prospectively, A.M. Best anticipates the ongoing control of operating expenses and a stable investment income will continue to support operating profitability.
PII's short operating history obscures the view on its underwriting results as losses are not fully developed. As observed in the company's 2008 and 2009 underwriting result, the small and specialized underwriting book gives rise to unforeseen underwriting volatility. However, PII continued to achieve overall favorable operating performance.
For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodology.
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.