SINGAPORE--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of “bbb” of Pacific International Insurance Pty Limited (Pacific) (Australia). The outlook for both ratings remains stable.
The affirmation reflects Pacific’s favorable balance sheet strength, consistently profitable operating results and niche business profile.
Pacific has a conservative capital management approach and maintains a capital adequacy ratio that is significantly above its local regulatory requirement. Operating performance continues to be profitable, underpinned by a significant source of investment earnings generated from a large investment portfolio relative to premium size, which offers a substantial buffer against underwriting volatility.
Pacific sources the vast majority of its premiums from its sister companies, Rapid Solutions Pty Limited and Rapid Training Pty Limited, which provide clients with other specialized value-added services. Pacific benefits from the Rapid group’s established brand name and industry expertise in the pest control and building inspection market, enabling the company to exercise superior risk-selection and claims management, thereby sustaining a lower loss ratio relative to the industry.
Negative rating factors include a competitive business environment and a relatively high expense ratio.
Due to strong competitive pressure on premium rates in the market, Pacific’s premium revenue has been stagnant in recent years. This creates a difficult environment to reduce expense ratio or achieve economies of scale. As a result, Pacific’s return on equity remains relatively low compared to the industry.
While positive rating actions are not likely in the short to medium term, negative rating pressure could occur if Pacific’s risk-adjusted capitalization deteriorates materially due to unexpected capital repatriation, or if its profitability falls below A.M. Best’s expectation due to competitive pressures or multiple large claims emerging.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
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