A.M. Best Affirms Credit Ratings of Guild Insurance Limited

A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Guild Insurance Limited (GIL) (Australia). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect GIL’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The ratings also acknowledge GIL’s prudent reserving practices, moderate underwriting leverage and direct distribution network within Australia’s allied health professional associations.

GIL’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains robust under standard and catastrophe stress test scenarios and supportive of the balance sheet assessment of very strong. The operating performance assessment is supported by the company’s track record of positive net operating results, underpinned by a steady stream of investment income and conservative retention limits. Over the past five years, the company’s operating ratio has averaged approximately 93%, while its return on net assets averaged approximately 10%.

Partially offsetting rating factors include below-target underwriting results, as shown by a five-year average combined ratio of 100%. This is due to a combination of factors including intensifying competitive pressures, rising expenses and unprofitable growth into new distribution channels in recent years.

GIL has since focused on improving risk selection and aggressive remedial actions to improve underwriting profitability, particularly in regard to its underperforming Industrial Special Risks (ISR) portfolio. As a result of these initiatives, A.M. Best expects the company’s prospective underwriting performance to stabilize and overall prospective earnings to remain positive, supported by its profitable core direct portfolio, on-going expense control initiatives and stable investment earnings.

Positive rating actions are unlikely over the near term. Negative rating actions could occur if there is a significant decline in GIL’s risk-adjusted capitalization, accompanied by deteriorating underwriting results.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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