Congregational & General Insurance plc has received a BBB- long-term counterparty credit and insurer financial strength rating from Standard & Poor's. The outlook is stable.
S&P's credit analyst, Nigel Bond, said: "The ratings reflect the company's strong operating performance and its robust competitive position within its core, but very small, niche market. Offsetting factors are the marginal competitive position of Congregational & General's domestic property account, the vulnerability of capital to a one-in-250-year catastrophe, and its limited financial flexibility."
The stable outlook reflects S&P's view that although operating performance and capital adequacy will deteriorate in the year ending March 31, 2007, it will then stabilize. S&P's expects the net combined ratio to weaken to 90%-95% in 2007 (82.3% in 2006), and the ROE to about 15% (27% in 2006). The capital adequacy ratio, according to S&P's risk-based capital model, is expected to fall sharply in 2007 from a strong to a marginal level due to changes in the catastrophe reinsurance protection acquired.
The ratings are unlikely to change over the rating horizon. Nevertheless, they may be raised if the company improves its capital adequacy, and if it can demonstrate that it has noticeably enhanced its competitive position with its direct distribution strategy. Conversely, the ratings may be lowered if either the core niche business or the capital adequacy ratio deteriorates significantly beyond 2007.
