AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Premier Insurance Company Limited (Gibraltar). The outlook of these Credit Ratings (ratings) is stable. The company is wholly owned by Premier Underwriting Holdings (Gibraltar) Limited (Premier), which is the ultimate non-operating holding company and consolidating rating unit for the group.
The ratings reflect Premier’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
Premier’s balance sheet strength is underpinned by its strongest level of risk-adjusted capitalisation, as measured by Best Capital Adequacy Ratio (BCAR), which has been supported by internal capital generation through the retention of earnings over time. The company’s conservative reserve management has provided stability to its balance sheet, which is supported by sufficient levels of liquidity. An offsetting factor in Premier’s balance sheet strength assessment is the potential for volatility in risk-adjusted capitalisation. This is due to its small absolute capital base and the company’s dependence on reinsurance.
Premier’s focus on bottom-line profitability is evidenced by profits reported in each of the past five years, translating to a five-year (2016-2020) weighted average return on equity of 7.4%. Historically, good underwriting results have been observed despite a highly competitive pricing environment, with the company posting a five-year (2016-2020) weighted average combined ratio of 90.5%. However, results can be volatile due to the company’s small operational scale, as demonstrated in 2019, when the company reported a combined ratio in excess of 100% due to the poor performance of one book of business and lower-than-expected earned premiums. Underwriting profitability has returned in 2020, benefiting from reduced claims frequency owing to COVID-19 lockdown measures and the cancellation of underperforming accounts.
Premier has successfully navigated the fiercely competitive U.K. motor market to date through its proven business strategy of targeting a niche segment. The company writes a small book of business that is concentrated by product offering and geography. In 2020, Premier reported a 29% growth in revenue, with gross written premium of GBP 33.3 million. AM Best expects the company to generate modest growth over the near term, supported by its long-term relationships with its distribution partners.
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