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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - SEPTEMBER 30, 2009 12:00 AM (EDT)
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 Insurance) (New Zealand). The outlook for both ratings is stable.
The ratings reflect Ansvar Insurance's supportive risk-adjusted capitalization and stable business profile in the niche markets of faith, education and community care groups in New Zealand.
As at fiscal year-end 2008, Ansvar Insurance continued to maintain a level of capitalization that is supportive of its ratings. Although its risk-adjusted capitalization declined slightly for the current year primarily due to an increase in underwriting risk, the notable growth in premium revenue of 16% in 2008 was mostly attributed to rate increases and improvement on lapse experience. Commencing in fiscal year 2009, Ansvar Insurance will begin to pay a target annual dividend to its immediate parent, Ansvar Insurance Limited (Australia), subject to an evaluation of Ansvar Insurance's financial condition, operating result and liquidity requirement.
As a strategically important subsidiary of its ultimate parent, Ecclesiastical Insurance Office plc, Ansvar Insurance has established a strong presence in its niche markets, focusing on its commercial portfolio (represented by 60% of the company's gross premium revenue in 2008).
Offsetting rating factors include the company's volatile underwriting performance and a lowered short-term investment yield.
Ansvar Insurance's operating profitability continued to be pressured over the past two years due predominantly to underwriting losses. The company's loss experience deteriorated over the same period due mainly to frequent large claims and insufficient rate increases. Ansvar Insurance's loss ratio was 81.0% in 2008, compared to its average loss ratio of 67.0% over the past five years. Prospectively, Ansvar Insurance's underwriting margin is expected to gradually improve from recent rate adjustments.
Ansvar Insurance's investment portfolio focuses on liquidity and security of principal. As at year-end 2008, net investment income was NZD 1.7 million, compared to NZD 1.1 million in 2007. The investment yield for the year was 7.0%, reflecting the company's risk averse portfolio mix, with 59% of total invested assets in New Zealand government bonds, 16% in highly rated corporate bonds and 25% in cash and short-term deposits. However, given that a lowered short-term investment yield is anticipated in the near term, A.M. Best expects that Ansvar Insurance's profitability could be pressured going forward.
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.