AM Best Affirms Evergreen Insurance Ratings
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] [Bermuda]. The outlook of these Credit Ratings [ratings] is stable.
A statement from the ratings agency said, “The ratings of EICL are based on its balance sheet strength, which is categorized as strong by A.M. Best, and track record of favorable operating performance. As a pure captive of the Evergreen Group, EICL has built its underwriting portfolio mainly in marine, aviation, property, engineering, motor and other liabilities related to the group’s operations.
“EICL’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio [BCAR], remains at a high level due to a low risk retention strategy relative to its capital and surplus. Underwriting performance has remained favorable, with a low net loss ratio along with minimal distribution costs. In terms of asset quality, EICL invested solely in cash and deposits and an intercompany loan, which generate stable interest income.
“Offsetting rating factors include liquidity constraints associated with the intercompany loan, which accounted for approximately one-third of the company’s total assets as of June 30, 2017. The company’s balance sheet strength also is sensitive to a potential increase in credit risk associated with reinsurance receivables related to its sizeable gross aviation risk.
“Positive rating actions could occur if the company can strengthen its capitalization and liquidity. Negative rating actions could occur if EICL’s absolute capitalization declines materially or if its risk-adjusted capitalization decreases sharply. Furthermore, the ratings could be impacted if the parent company’s credit profile deteriorates. “
