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FOR IMMEDIATE RELEASE
HONG KONG - SEPTEMBER 13, 2013 12:00 AM (EDT)
A.M. Best Asia-Pacific Limited has removed from under review with developing implications and affirmed the financial strength rating of B (Fair) and issuer credit rating of “bb+” of ACS (NZ) Limited (ACS) (New Zealand). The outlook assigned to both ratings is stable.
The ratings were placed under review on January 31, 2013, as A.M. Best needed more clarity on the reinsurance buffer available to ACS as well as on the outcome from the discussions with its prudential regulator, the Reserve Bank of New Zealand.
A recently completed reallocation of gross claims to other events has improved ACS’ reinsurance buffer on its February 2011 earthquake claims. Regarding the regulatory position of ACS, its provisional license has been extended by the Reserve Bank of New Zealand and remains current.
ACS’ financial strength, as measured by Best’s Capital Adequacy Ratio (BCAR), is expected to improve significantly under baseline projections. However, as a run-off company with no significant earnings, unforeseen expense shocks could result in significant reductions to capital (expense shocks contributed to an unexpected drop in ACS’ reported 2012 capital) and could cause considerable volatility to its BCAR, especially while gross risks (gross outstanding claims and related reinsurance recoverables) remain large relative to capital.
Stability in ACS’ capital position could result in positive rating momentum. However, a deterioration in its BCAR could result in negative rating pressure.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
A.M. Best Asia-Pacific Limited is a subsidiary of A.M. Best Company. A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.