SINGAPORE--(BUSINESS WIRE)--#insurance--AM Best has revised the outlooks 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 appropriate enterprise risk management. In addition, the ratings factor in no rating lift or drag from the company’s ultimate ownership by The Pharmacy Guild of Australia (PGOA).

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

GIL’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level in fiscal year-end 2021 (30 June 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 reinsurance utilisation and a capital injection from its parent group, PGOA, during fiscal year 2021. GIL has held provisions for potential COVID-19 related claims over the past two fiscal years arising predominantly from BI coverages, with the final cost subject to a high level of uncertainty. However, following the latest judgments in a series of legal proceedings in Australia, the company has gained increased certainty on these policy coverages, and subsequently released a large part of its COVID-19 related provisions as at 31 March 2022. AM Best expects the release of GIL’s provisions to bolster its regulatory solvency and risk-adjusted capitalisation in fiscal year 2022.

AM Best views GIL’s operating performance as adequate, with an average return-on-equity ratio (after tax) of 1.8% (fiscal years 2017-2021). Whilst the company’s operating performance exhibited a deteriorating trend in fiscal year 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 record improved technical profits driven by pricing adjustments and increased operational efficiency over the medium term, with its net investment yield 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 below 1% in 2021. However, GIL is a leading provider of insurance protection to allied health professional associations, supported by its direct access to members of its parent, PGOA, which is a national employers’ organisation representing community pharmacies across Australia.

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

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