AM Best revises outlook to stable for Guild Insurance Limited

SINGAPORE–(COMMERCIAL WIRE)–I am better has revised the outlook to stable from negative and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Guild Insurance Limited (GIL) (Australia).

These credit ratings (ratings) reflect GIL’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and adequate enterprise risk management. In addition, the ratings do not take into account that the ultimate ownership of the company is owned by The Pharmacy Guild of Australia (PGOA).

The outlook revision to stable reflects an improvement in the strength of GIL’s balance sheet and operating performance fundamentals, following greater certainty about GIL’s exposure to business interruption (BI) claims related to COVID-19, which has allowed the company to release provisions.

GIL’s balance sheet strength is supported by its risk-adjusted capitalization, which reached its highest level as of the end of fiscal year 2021 (June 30, 2021), as measured by Best’s Capital Adequacy Ratio (BCAR). . Capital adequacy in recent years has been supported by GIL’s capital management actions, including increased use of reinsurance and a capital injection from its parent group, PGOA, during fiscal 2021. GIL has maintained provisions for possible claims related to COVID-19 during the last two fiscal years. years derived predominantly from BI hedges, with the final cost subject to a high level of uncertainty. However, following the latest trials in a series of legal proceedings in Australia, the company gained greater certainty about these policy covers and subsequently released a large portion of its COVID-19 related provisions as of March 31, 2022. AM Best expects the release of GIL provisions to bolster its regulatory solvency and risk-adjusted capitalization in FY2022.

AM Best considers GIL’s operating performance to be adequate, with an average rate of return on equity (after taxes) of 1.8% (fiscal years 2017-2021). While the company’s operating performance exhibited a deteriorating trend in fiscal years 2020 and 2021, primarily driven by COVID-19 related provisions, GIL’s underwriting profit and net income are expected to benefit from a significant reduction. in these provisions during fiscal year 2022. In addition, AM Best expects the company to post improved technical earnings driven by pricing adjustments and increased operating efficiency in the medium term, and its net investment return is expected to remain in the low single digit range given Australia’s low interest rate environment.

AM Best views GIL’s business profile as neutral. The company is considered a small insurer in Australia’s non-life sector, with gross premiums of AUD 236 million and an overall market share of less than 1% in 2021. However, GIL is a leading provider of insurance protection for associations of allied health professionals, supported by its direct access to members of its parent company, PGOA, which is a national employers’ organization representing community pharmacies across Australia.

Ratings are communicated to rated entities prior to publication. Unless otherwise stated, ratings have not changed since that communication.

This news release relates to credit ratings that have been posted on the AM Best website. For full rating information related to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please refer to the Recent Rating Activity web page. AM Best. For additional information on the use and limitations of credit rating opinions, see Best’s Guide to Credit Ratings. For information on the proper use of Best’s credit ratings, Best’s preliminary credit assessments, and AM Best’s press releases, see the Guide to the Proper Use of Best’s Ratings and Assessments.

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