Associated Electric & Gas Insurance Services (AEGIS) has been assigned the financial strength rating of “A- (Excellent)” and issuer credit rating of “a-” by A.M. Best.
The rating affirmations recognise AEGIS’s solid risk-adjusted capitalisation, which is appropriate for its current investment and insurance risks and a favourable long-term financial performance.
Partially offsetting these positive rating factors are the volatility inherent in its underwriting results, given the high severity risk profile and concentration risk of the energy market it serves.
“Due to the long-tail nature of its business and as a mutual insurer, AEGIS typically relies on investment earnings to support overall net income where underwriting results are managed toward the break-even level, reflective of low profitability,” said A.M. Best in a recent statement.
AEGIS’ outlook could be revised if external market conditions weaken significantly, resulting in weakened free cash flow, a decline in liquidity levels, an increase in underwriting leverage and/or outsized catastrophe or investment losses in conjunction with a significant decline in risk-adjusted capitalisation.
