A.M. Best Co. announced that it has affirmed the financial strength rating of “A+” (Superior) of Guernsey-based Jupiter Insurance Ltd. with a stable outlook.
“The rating reflects the company’s superior risk-adjusted capitalisation and operating performance,” Best said. “A partially offsetting factor is the company’s high dependence on one large contract. Jupiter is a single parent captive of BP plc, which is an integrated oil and gas company.”
Best said it “believes that Jupiter’s prospective risk-adjusted capitalisation is likely to remain superior. At year-end 2004, an anticipated 50 percent increase in retained earnings is likely to further strengthen capitalisation. In addition, the company’s practice of not using reinsurance leads to a low level of credit risk exposure. The concentration risk, arising from the fact that most of investments are placed within the group, has been factored into the rating.”
The rating agency also indicated that, Jupiter’s “superior operating performance is likely in 2005 with stable technical profitability of over £160 million ($311 million) combining with excellent investment income of approximately £90 million ($175 million), derived from Jupiter’s investment in a discount note held with BP International Ltd. An adjustment in the period of the main insurance contract the company writes is likely to result in a 20 percent increase in earned premiums in 2004 and a four percentage point improvement in the company’s combined ratio to approximately 20 percent. The company is highly dependent on this single contract, which is expected to account for approximately 60 percent of gross premium in 2004.”
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