AM Best Affirms Credit Ratings of Ecclesiastical Insurance Office plc
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a" (Excellent) of Ecclesiastical Insurance Office plc (EIO) (United Kingdom). At the same time, AM Best has affirmed the Long-Term Issue Credit Rating of "bbb" (Good) on GBP 106,450,000, 8.625% non-cumulative irredeemable preference shares issued by EIO. The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect EIO's 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.
EIO's balance sheet strength assessment is underpinned by risk-adjusted capitalisation that AM Best expects to remain comfortably above the minimum required for the strongest assessment, as measured by Best's Capital Adequacy Ratio (BCAR), supported by good internal capital generation. The assessment also factors in the company's good liquidity profile. An offsetting rating factor is EIO's relatively high allocation to equity investments, which heightens the sensitivity of its risk-adjusted capitalisation to financial market volatility, although capital buffers are expected to remain sufficient to absorb financial market shocks over the cycle.
EIO has a track record of adequate operating performance, demonstrated by a five year (2016-2020) weighted average return on equity of 6.4%. The company reported a net loss of GBP 15.2 million in 2020, negatively impacted by COVID-19-related losses of GBP 16.9 million on the technical side, and fair-value investment losses of GBP 34.5 million. EIO's financial performance improved in the first quarter of 2021. Prospectively, AM Best expects EIO to generate robust returns on equity, althugh these should remain subject to potential volatility due to the company's investment allocation.
EIO has a specialist business profile, and offers insurance products and risk management services in the faith, heritage, charity, education and real estate markets, where it maintains a strong competitive position. Over the past five years, the company has experienced year-on-year growth, with gross written premium reaching GBP 437 million in 2020. AM Best expects EIO's premium to continue to increase gradually, driven by rate increases and new business opportunities.
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 media use of Best's Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and AM Best Rating Action Press Releases.
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