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” of Ecclesiastical Insurance Office plc (EIO) (United Kingdom). At the same time, AM Best has affirmed the Long-Term Issue Credit Rating of “bbb” on GBP 106,450,000, 8.625% non-cumulative irredeemable preference shares issued by EIO. The outlook of these Credit Ratings (ratings) remains stable.

The ratings reflect EIO’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

EIO’s balance sheet strength is underpinned by risk-adjusted capitalisation that AM Best expects to remain at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by good internal capital generation. In addition, the company maintains a good liquidity profile, with fixed-income securities and equities accounting for the majority of its investment portfolio.

EIO has a track record of adequate operating profits, with technical results supported by generally positive investment earnings. In 2018, pre-tax profits fell to GBP 15 million from GBP 82 million in the prior year, due to a marginal investment result driven by unrealised losses on the company’s equity and fixed income portfolios. In the future, AM Best expects EIO to produce a robust return on equity, albeit with some volatility due to the relatively high allocation to equities in its investment portfolio.

EIO has a specialist business profile offering insurance products and risk management services in the faith, heritage, charity, education and real estate markets, where it maintains a strong competitive position. Offsetting factors include the geographical concentration of its insurance portfolio in the UK and Ireland. Following a downward trend from 2013 to 2015, gross written premiums have increased to GBP 357 million in 2018 from GBP 310 million in 2016 and are expected to continue to grow gradually. EIO’s ERM capabilities are aligned appropriately with its risk profile. The risk management framework benefits from stringent controls introduced as part of Solvency II implementation. Risk and capital management is supported by an internal capital model, which was approved for regulatory use by the Prudential Regulation Authority in July 2018.

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 Understanding 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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