A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Guild Insurance Limited (GIL) (Australia). The outlook for both ratings is stable.
The ratings reflect GIL’s ongoing operating profitability and distribution advantage in the health care and child care sectors.
Continued competitive market conditions and volatile investment markets pressured GIL’s operating performance; however, it managed to generate an operating profit of AUD 5.7 million in 2009, albeit lower than that of 2008. The underwriting loss generated by GIL in the year under review was more than offset by investment income.
GIL, a wholly owned subsidiary of the Pharmacy Guild of Australia, has a unique advantage in distributing its services to pharmacists and generally to the broader health care market. While GIL has sustained its foothold in the pharmacy and child care sectors, it continues to diversify its underwriting portfolio and expand its product reach geographically.
Partially offsetting these positive rating factors are GIL’s weakening risk-adjusted capitalization and tightening margin due to continued pressure on premium rates and high expenses.
GIL’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is commensurate with its existing ratings. However, its BCAR has deteriorated over the past year as underwriting risk grew quicker than adjusted surplus.
The continued competitive pressure on premium rates has strained GIL’s profitability; however, there are signs of rate increases on certain lines of business. The steadily increasing operating expenses of recent years are also exerting pressure on the company’s profitability.
For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at http://www.ambest.com/ratings/methodology.