Best Assigns New Technology Insurance ‘A-‘ Rating

December 24, 2003

A.M. Best Co. announced that it has assigned a financial strength rating of “A-” (Excellent) to Dublin-based New Technology Insurance (NTI), with a stable outlook.

“The rating reflects NTI’s excellent current and prospective capitalisation and operating performance,” said Best. “Offsetting factors include the company’s dependence on its parent company, The Carphone Warehouse Group plc (CPW), for premium generation and reinsurance provided by a non-rated CPW subsidiary.”

Best noted that, “NTI was created in August 2003 as a result of the planned portfolio transfers from The Carphone Warehouse Insurance Limited (CWIL) and The Phone House Insurance Limited (PHIL), both CPW subsidiaries based in the Isle of Man. Since November 2003, NTI has provided insurance for mobile phone handsets and accessories, primarily purchased by CPW customers in the UK and continental Europe. This business was previously underwritten through a fronting arrangement by PHIL and CWIL. NTI is now renewing the majority of this business directly, in addition to assuming existing business via novation agreements, which A.M. Best expects to be completed by the end of March 2004.”

According to Best’s risk-adjusted capital model the company has “excellent current and prospective capitalisation.” The bulletin indicated that “in addition to paid up capital of EUR 40.5 million (USD 50.3 million) provided by CPW in August 2003, A.M. Best expects NTI to increase capitalisation through the retention of earnings. Furthermore, the nature of the cover provided by NTI, which has an average tail of less than three months, ensures a low risk profile.”

It also enjoys an “excellent prospective operating performance.” Best said it “expects return on equity (ROE) in excess of 25 percent in the first two full years of operation (years ending March 2005 and 2006), in line with previous performance under the pre-existing structure but the same management. NTI’s investment strategy provides an element of volatility due to a material proportion of assets being held in equity-based investments; however the company manages any downside to exposure in line with guidelines discussed with A.M. Best.”

The announcement noted that although NTI’s business position is largely limited to the customers of CPW, “this arrangement effectively means that the company has no competitors for policies sold in CPW stores. Additionally, NTI participates on ventures with third party organizations in related technology industries. Expansion of this business, which currently accounts for less than 5% of the total premium income, is going to increase the company’s diversity and reduce its dependence on CPW.”

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