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 Limited (EICL), based in Bermuda.
The outlook of these credit ratings is stable.
The ratings reflect EICL’s balance sheet strength, which A.M. Best categorised as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
EICL’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at the strongest level, which is underpinned by low net underwriting leverage, a highly conservative investment portfolio and prudent reinsurance arrangements.
“The change in balance sheet strength assessment to very strong from strong reflects the company’s consistent trend in maintaining a robust level of BCAR with low volatility under standard and stress scenarios,” said A.M. Best.
EICL capital and surplus has grown slightly over the past five years as the combined result of profit accumulation and dividend payouts.
A.M. Best stated that going forward, it expects EICL to maintain an abundant buffer in its risk-adjusted capitalisation to support its risk profile.
EICL has demonstrated a track record of strong operating performance, mainly attributed to claims experience from group-related business, favourable reinsurance commission income and stable yet low investment yield.
With strong underwriting knowledge and high visibility of group-related business trends, A.M. Best explained the marine business to be the key driver of EICL’s operating profit going forward.
As a pure captive of Evergreen Group, EICL’s underwriting book primarily consists of marine, aviation and property risks related to the group’s operations.
A.M. Best outlined that in view of EICL’s high-severity low-frequency risk profile, the company utilises a comprehensive reinsurance programme arranged with a diversified panel of highly rated reinsurers and maintains a low premium retention rate.
“EICL continues to be an integral part of the group’s overall risk management by providing underwriting solutions, operational safety guidance and loss prevention services to affiliated companies,” A.M. Best stated.
However, A.M. Best suggested negative rating actions could occur if there are material capital or dividend payouts that lead to a substantial decline in EICL’s risk-adjusted capitalisation, or if there is a significant deterioration in the company’s operating performance that no longer supports the strong assessment.
In addition, “negative rating actions could occur if there is significant deterioration in the credit profile of its ultimate parent, Evergreen International S.A,” A.M. Best concluded.