AM Best Affirms Credit Ratings of Universal Insurance Company (Guernsey) Limited
AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Universal Insurance Company (Guernsey) Limited (UIC) (Guernsey). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect UIC’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, very limited business profile and marginal enterprise risk management (ERM).
UIC’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and by the company’s very conservative investment portfolio. AM Bests expects UIC’s BCAR scores to remain comfortably in excess of the minimum required for the strongest assessment, with good internal capital generation continuing to support the company’s growth. An offsetting factor in the balance sheet strength assessment is the company’s small capital base, which heightens the potential for volatility in risk-adjusted capitalisation.
Since its creation in 2014, UIC has achieved strong operating performance, evidenced by a five-year (2017-2021) weighted average return on equity of 38.3%. Earnings are derived primarily from the company’s excellent underwriting profitability, as seen in its five-year weighted average combined ratio of 20.1%, whilst the very conservative and highly liquid investment portfolio produces marginal but stable returns.
UIC provides ancillary motor policies, primarily distributed by brokers in the United Kingdom. The company’s profile is highly concentrated, as it operates in a single line of business in a single territory, which makes its business model vulnerable to changes in the U.K. motor market. Whilst UIC aims to grow its book of excess motor policies and create new products for the motor insurance market, AM Best expects its profile to remain very limited.
UIC’s ERM framework is considered evolving, and AM Best expects the company to continue to develop it. The marginal ERM assessment factors in the elevated risk profile stemming from UIC’s business model, which encompasses significant concentration risk.
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 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. For more information, visit www.ambest.com.
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Marving Lopez
Associate Financial Analyst
+44 20 7397 4289
marving.lopez@ambest.com
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Ghislain Le Cam, CFA, FRM
Director, Analytics
+44 20 7397 0268
ghislain.lecam@ambest.com
Jim Peavy
Director, Communications
+1 908 439 2200, ext. 5644
james.peavy@ambest.com
