Best’s News & Research Service - November 27, 2024 08:21 AM (EST)
AM Best Revises Issuer Credit Rating Outlook to Positive for Group Ark Insurance Limited
- November 27, 2024 08:21 AM (EST)
//BestWire// - AM Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICR of “a” (Excellent) of Group Ark Insurance Limited (GAIL) (Bermuda). The outlook of the FSR is stable. GAIL is a wholly owned subsidiary of Ark Insurance Holdings Limited (Ark), the non-operating holding company of the Ark group. Concurrently, AM Best has revised the outlook to positive from stable for the Long-Term Issue Credit Ratings (Long-Term IRs) on GAIL’s outstanding rated instruments and affirmed the Long-Term IRs. See below for a detailed listing of Long-Term IR ratings.
The positive outlook of the Long-Term ICR reflects AM Best’s expectation that Ark will maintain its profitability at a level commensurate with a strong operating performance assessment, supported by effective cross-cycle underwriting management.
The Credit Ratings (ratings) reflect Ark’s consolidated balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). In addition, the ratings reflect GAIL’s strategic importance to Ark, as the group’s Bermuda-based (re)insurance vehicle. GAIL provides reinsurance to Ark’s corporate member at Lloyd’s and writes third-party (re)insurance business.
Ark’s balance sheet strength is underpinned by consolidated risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Ark’s risk-adjusted capitalisation is projected to remain at this level, supported by good internal capital generation. The balance sheet strength assessment also considers Ark’s prudent reserving, low risk investment portfolio, good financial flexibility and strong liquidity profile. A partially offsetting factor is the company’s material exposure to catastrophe risk, which AM Best expects to be managed through the use of reinsurance and robust exposure management.
The adequate operating performance assessment considers the group’s good overall performance, illustrated by a consolidated five-year (2019-2023) return-on-equity and net combined ratio of 22.8% and 89.4% (as calculated by AM Best), respectively. AM Best expects Ark to maintain robust technical return metrics over the underwriting cycle, notwithstanding the potential volatility associated with its catastrophe-exposed property business. Ark’s recent underwriting performance has proven resilient to major losses. For 2023 and the first nine months of 2024, Ark reported a consolidated net combined ratio of 86.0% (as calculated by AM Best) and 88.9% (as reported by the company), respectively, driven by selective underwriting across all lines of business and prior-year reserve releases. Furthermore, earnings have been supported by the group’s solid investment income, which has reflected the improved interest rates environment in recent years.
Ark’s neutral business profile assessment is reflective of its diversified underwriting portfolio across its Lloyd’s and Bermuda (re)insurance platforms. The group reported gross written premium of USD 1.9 billion in 2023 and USD 1.9 billion for the first nine months of 2024. Ark benefits from experienced and stable management and underwriting teams that have been strengthened appropriately as its business has grown.
The following Long-Term IRs have been affirmed with the outlooks revised to positive from stable:
Group Ark Insurance Limited—
— “bbb+” (Good) on EUR 39.1 million floating rate subordinated notes, due 2041
— “bbb+” (Good) on USD 47.0 million floating rate subordinated notes, due 2041
— “bbb+” (Good) on USD 70.0 million floating rate subordinated notes, due 2041
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.