A.M. Best Upgrades Credit Ratings of Evergreen Insurance Company Limited

A.M. Best has upgraded the Financial Strength Rating to A (Excellent) from A- (Excellent) and the Long-Term Issuer Credit Rating to “a” from “a-” of Evergreen Insurance Company Limited (EICL) (Bermuda). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect EICL’s balance sheet strength, which A.M. Best categorizes as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.

As a pure captive of Evergreen Group, EICL underwrites mainly marine, aviation and property risks related to the group’s operations.

The upgrade of EICL’s ratings reflect the improvement in the quality of its capital and liquidity position following the full repayment of the loan-back to its parent company in December 2017, coupled with the company’s prudent dividend policy over the short to intermediate term. The company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remained at a robust level, supported by low underwriting leverage, prudent reinsurance arrangements with a diversified panel of financially sound reinsurers, and a conservative reserving practice. Despite EICL’s small absolute capital size, A.M. Best expects that the company will continue to grow its capital and surplus gradually through profit retentions while maintaining strong liquidity over the short to intermediate term.

The company has demonstrated a track record of strong operating results, mainly underpinned by favorable and stable net claims experience as a result of an effective reinsurance strategy. A stream of ceding commission income also lowered the captive’s operating expenses. Investment yields have been positive yet low due to the conservative investment approach and continued low interest rate environment.

As a pure captive, EICL continues to be an integral part of the overall risk management of Evergreen Group by providing underwriting solutions, operational safety and loss prevention services to affiliated companies of the group. The company is equipped with strong underwriting know-how, as substantiated by its favorable operating performance while maintaining a broad geographic diversification of insured risks.

Offsetting rating factors include the potential increase in reinsurance credit risk associated with reinsurance recoverables related to the company’s sizable ceded aviation risk. Notwithstanding, the captive regularly monitors the reinsurers’ credit profiles, and has strengthened some reinsurance contract clauses recently to reduce the potential credit and liquidity risks.

While positive rating actions are not likely over the short to intermediate term, negative rating actions could occur if there are material capital or dividend payouts that lead to a substantial decline in EICL’s risk-adjusted capitalization, or there is a deteriorating trend in the company’s operating performance.

A.M. Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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