LONDON–(COMMERCIAL THREAD) –AM Best confirmed the financial strength rating of B ++ (good) and the long-term issuer credit rating of “bbb” (good) of Premier Insurance Company Limited (Gibraltar). The outlook for these credit ratings (ratings) is stable. The company is 100% owned by Premier Underwriting Holdings (Gibraltar) Limited (Premier), which is the ultimate non-operating holding company and consolidating rating unit of the group.
The ratings reflect the strength of Premier’s balance sheet, which AM Best considers strong, as well as its adequate operational performance, limited business profile and appropriate management of business risks.
Premier’s balance sheet strength is underpinned by its highest level of risk-adjusted capitalization, as measured by the Best Capital Adequacy Ratio (BCAR), which has been supported by internal capital generation through retention benefits over time. The prudent management of the company’s reserves has ensured the stability of its balance sheet, which is supported by sufficient levels of liquidity. A compensating factor in assessing Premier’s balance sheet strength is the potential for volatility of risk-adjusted capitalization. This is due to its low absolute capital base and the company’s reliance on reinsurance.
Premier’s focus on net profitability is evidenced by reported earnings in each of the past five years, resulting in a five-year (2016-2020) weighted average return on equity of 7.4%. Historically, good technical results have been observed despite a very competitive pricing environment, with the company posting a weighted average combined ratio over five years (2016-2020) of 90.5%. However, results can be volatile due to the small operational scale of the company, as demonstrated in 2019, when the company declared a combined ratio above 100% due to the poor performance of a portfolio of activities and earned premiums below expectations. Technical profitability returned in 2020, benefiting from a reduced frequency of claims due to containment measures linked to COVID-19 and the cancellation of underperforming accounts.
Premier has successfully navigated the fiercely competitive UK automotive market to date with its proven business strategy of targeting a niche segment. The company writes a small business book focused by product offering and geography. In 2020 Premier saw 29% revenue growth, with a gross written premium of £ 33.3million. AM Best expects the company to generate modest growth in the near term, supported by its long-term relationships with its channel partners.
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