Best’s News & Research Service - February 23, 2023 09:22 AM (EST)
AM Best Revises Outlooks to Stable for Pacific International Insurance Pty Limited
- February 23, 2023 09:22 AM (EST)
Singapore //BestWire// - AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Pacific International Insurance Pty Limited (Pacific) (Australia).
The Credit Ratings (ratings) reflect Pacific’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). These ratings also factor in a neutral impact from Pacific’s ultimate owner, Badger Mutual Wealth (Pty) Ltd (the Badger group), an insurance group domiciled in South Africa.
The revised outlooks reflect an improving trend in Pacific’s balance sheet strength, supported by internal capital generation and capital injections totaling AUD 9 million during the 2023 fiscal year (FY) ending 30 June. The company’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation, which was at the strong level in FY2022, as measured by Best’s Capital Adequacy Ratio (BCAR). The capital injections, conservative investment strategy and continued positive underwriting results over the medium term, are expected to stabilise its risk-adjusted capitalisation at the strongest level. However, Pacific’s capital adequacy remains sensitive to the successful execution of its business plan, achievement of its performance targets and projected capital generation over the medium term.
AM Best views Pacific’s operating performance as adequate. The company is demonstrating a positive trend in its underwriting performance after reporting losses in FY2020 and FY2021. The company reported a profit of AUD2.2 million in FY2022, and its FY2023 six-month operating results are also in line with management’s expectation of profitability. Pacific experienced an elevated expense ratio following the Badger group’s acquisition, due to the onboarding of a sizeable motor portfolio and a significant investment made to support its market positioning, but expenses are expected to trend lower as the company’s operational scale expands in the near term. Pacific is monitoring its product offerings and pricing risks to support its prospective operating performance.
AM Best assesses Pacific’s business profile as limited. This reflects the company’s relatively modest scale of operations. Whilst Pacific’s net retained insurance portfolio is predominantly motor and motor-related products at present, AM Best expects Pacific’s premium base to grow modestly in its other lines of business such as pet insurance and binder partners, as well as a partnership with a motor vehicle novated lease insurance distributor in Australia.
AM Best assesses Pacific’s ERM as appropriate, given the size, nature and the complexity of its operations. However, AM Best views ongoing strengthening of the company’s ERM capabilities as necessary to support its increasing operational scale and widened product offering in the near to medium term.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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.