A.M. Best Co. announced that it has affirmed the financial strength rating of ‘A+’ (Superior) of the U.K.-based HSB Engineering Insurance Company Limited (HSBEIL) with a “stable” outlook.
“The rating reflects HSBEIL’s superior business position, operating performance and stand-alone risk-adjusted capitalisation,” said Best, adding that it “deems HSBEIL to be a core subsidiary of its parent, The Hartford Steam Boiler Inspection and Insurance Company,” which also carries an A+ rating. The group became part of AIG in 2000. Best indicated that the “main offsetting factor is the company’s limited diversification by business line.”
Best “regards HSBEIL’s business position in the engineering insurance sector as superior,” the bulletin continued, adding that “although premium income is modest (gross premiums written in 2002 were USD 80.4 million), Its position derives from its specialist focus, ancillary inspection and risk management services, as well as its extensive engineering and equipment-related databases that facilitate risk selection and claims management expense control.”
The rating agency also said it expects that the company’s “recent record of superior underwriting profitability is likely to continue at year-end 2003, based on strong insurance rates in the company’s main markets in the United Kingdom and Canada. Continued profitable growth is expected as the company expands its volume with larger customers and develops engineering business from new territories.”
Best “anticipates that year-end 2003 stand-alone capitalisation will be maintained at a superior level on a risk-adjusted basis, supporting growth in net premiums written in excess of 25 percent. It also expects further growth in policyholders’ surplus to continue in 2003, “although at a lower level than the 23 percent achieved in 2002.” The surplus was $79 million at the end of 2002.
Best concluded that HBSElL’s “risk-adjusted capitalisation will be maintained at the present superior level through retained earnings, despite further significant premium growth,” and “will continue to achieve combined ratios under 100% in 2003 and 2004, subject to normal loss experience.”
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