AM Best Downgrades Credit Ratings of Premier Insurance Company Limited

AUGUST 15, 2024 08:52 AM (EDT)

AM Best Downgrades Credit Ratings of Premier Insurance Company Limited

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FOR IMMEDIATE RELEASE

LONDON - AUGUST 15, 2024 08:52 AM (EDT)
AM Best has downgraded the Financial Strength Rating to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Rating to "bb" (Fair) from "bbb-" (Good) of Premier Insurance Company Limited (Premier) (Gibraltar). The outlook of these Credit Ratings is negative.

The Credit Ratings (ratings) reflect Premier's balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.

The rating downgrades reflect a weakening in Premier's operating performance and balance sheet strength fundamentals. This follows the company reporting a larger than expected, and third consecutive year of operating losses in 2023, resulting in a material depletion of its reported shareholders' equity. The assessment considers actions taken by Premier's management to strengthen the company's balance sheet through a series of capital injections from its non-operating holding company, Premier Underwriting Holdings (Gibraltar) Ltd. (PUHGL), in 2023 and 2024.

Premier's balance sheet strength is underpinned by risk-adjusted capitalisation at the adequate level, as measured by Best's Capital Adequacy Ratio (BCAR). Offsetting balance sheet strength factors include the company's small and reduced capital base in absolute terms, which heightens potential balance sheet volatility. The balance sheet strength assessment also factors in a neutral holding company impact arising from PUHGL, which operates without any debt and is expected to maintain risk-adjusted capitalisation at least at the adequate level on a consolidated basis.

Premier reported a loss after tax of GBP 4.3 million in 2023, which followed a loss after tax of GBP 6.2 million in 2022; these are represented by a return-on-equity ratio of -39.1% and 42.5%, respectively. The deterioration in the company's operating performance was driven by a string of poor underwriting results in 2022 and 2023, due to the strengthening of its reserves, in part to reflect market-wide pressures including claims inflation and settlement delays, which are negatively impacting the U.K. motor insurance sector. AM Best expects underwriting performance to improve markedly following significant rate increases implemented throughout 2024, as well as a scale-down of the company's non-core books of business, which historically run at higher loss ratios. Nonetheless, the U.K. motor industry remains highly competitive, and its challenging dynamics represent a significant headwind to the company in achieving its business plans.

As a mono-line motor insurer in the United Kingdom, Premier's limited business profile is reflected by its small book of business that is concentrated by product offering and geography.

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 Performance Assessments, 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.