Ratings agency A.M. Best has affirmed the “B++” (Good) financial strength rating and the “bbb” long-term issuer credit rating of Pacific International Insurance. The outlook of these ratings is stable.
Pacific is a small, niche insurer that underwrites insurance products for the weed, pest control and building industries in New Zealand and Australia.
According to A.M. Best, the ratings reflect Pacific’s strong balance sheet strength, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
“Pacific’s strong balance sheet assessment is due in part to its low underwriting leverage and conservative investment portfolio. Given the volume of risks that Pacific currently writes and retains, the capital required to support the company’s current book of business is relatively modest,” it said. “In addition, Pacific continues to conservatively invest it’s technical and shareholders’ funds, with cash and term deposits making up the entire investment portfolio.”
Moreover, A.M. Best said the firm has generated operating profits over the past five years, driven mainly by the favorable claims experience of its product offerings and a steady stream of interest income. As the group continues to gain operational efficiencies, its operating results are expected to remain positive and gradually improve over time.
However, the agency said, Pacific’s limited product offerings and high expense ratio have constrained its business profile assessment.
“Given its status as a small and stable insurer within a niche segment, Pacific’s risk profile shows high business concentration risk,” it noted. “Pacific’s risk management capabilities are considered to be aligned appropriately with its risk profile, which is supported by the company’s low product and investment risk profile, as well as by various strategic initiatives to increase business volumes and broaden its policyholder base.”
A.M Best said it expects Pacific to maintain positive operating results. However, negative rating actions could occur should there be a significant deterioration in the firm’s risk-adjusted capitalization or if its profitability falls below expectation, the agency added.
