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’s Capital Adequacy Ratio (BCAR), which has been supported by the retention of earnings over time. An offsetting factor in Premier’s balance sheet strength assessment is its susceptibility to potential volatility in risk-adjusted capitalisation due to its small absolute capital base and high dependence on reinsurance.

Premier has a track record of generating positive operating results, demonstrated by a five-year (2017-2021) weighted average return on equity of 5.0%. This has been supported by robust underwriting performance, illustrated by a five-year (2017-2021) weighted average combined ratio of 95.5%, and positive contributions from its investment performance in most years. However, results can be volatile due to the company’s small operational scale and the highly competitive pricing conditions in the U.K. motor market. This was observed in 2021, when the company reported a weakened combined ratio of 103.0%, following lower than expected premium volume amidst adverse pricing conditions. Underwriting results in 2021 were also impacted by one-off accounting changes to the booking of profit sharing agreements, with the operating expense ratio rising 8.3 percentage points to 29.2%.

As a mono-line motor insurer in the United Kingdom, Premier’s small book of business is concentrated by product offering and geography. Nonetheless, the company has successfully navigated the fiercely competitive U.K. motor market to date through its proven business strategy of targeting a niche segment. In 2021, Premier reported a 30% drop in revenue to GBP 23.3 million as it favoured maintaining rate adequacy over protecting premium volume. AM Best expects the company to generate moderate growth over the near term, supported by the launch of two new motor products and upward pressure on premium rates as the market looks to combat rising claims inflation.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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