A.M. Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” of Evergreen Insurance Company.
Evergreen Insurance, the pure captive of Evergreen Group, underwrites mainly marine, aviation and property risks related to the group’s operations.
The ratings reflect Evergreen’s balance sheet strength, which A.M. Best categorises as strong, as well as its strong performance, neutral business profile and appropriate enterprise risk management.
The Bermuda-based captive’s risk-adjusted capitalisation remained at the strongest level and is also underpinned by low net underwriting leverage, a highly conservative investment portfolio and prudent reinsurance arrangements with a diversified panel of financially sound reinsurers, according to A.M. Best.
However, the company’s small absolute capital size has experienced some volatility over the past five years due to dividend payouts.
A.M. Best explained that going forward it expects the company to maintain a prudent approach in capital management by balancing business expansion needs and shareholder expectations.
As a pure captive, EICL continues to be an integral part of the overall risk management at Evergreen Group by providing value-added services such as underwriting solutions, operational safety and loss prevention services to affiliated companies.
The rating firm suggested offsetting rating factors include the potential volatility in risk-adjusted capitalization from heightened reinsurance credit risk in post major event scenarios due to the high reinsurance dependence in its captive business model.
The risk is mitigated partially through the use of a diversified panel of domestic and overseas reinsurers of sound financial quality.
A.M. Best said that while positive rating actions are not likely over the short to intermediate term, negative rating actions could occur if there are material capital or dividend payouts that lead to a substantial decline in the captive’s risk-adjusted capitalisation, or there is a deteriorating trend in the company’s operating performance.
