A.M. Best Co. has affirmed the financial strength rating of B++ (Good) and issuer credit rating of "bbb+" of CIGNA Life Insurance Company of Europe S.A.-N.V. (CLICE) (Belgium). The outlook on both ratings remains stable.
The ratings reflect the company's strong business position in a challenging market, reduced underwriting performance and rebounding risk-adjusted capitalisation.
A.M. Best expects the company's gross written premium to continue growing at an average combined rate of approximately 5% during 2007 due to the impact of recent distribution agreements. A.M. Best believes that the longer term prospects of the company depend heavily on its ability to introduce new and differentiated products in a highly competitive market. A.M. Best expects CLICE's combined ratio to return to about 99% in 2007 following the exceptional result of 2006 when the company's combined ratio was 94%. Although the company suffered one-off losses arising from the fraudulent activities of one distributor in 2006, most of the hit was taken and provisioned for in 2006. A.M Best believes that the rise in the combined ratio in 2007 will be a result of business expansion expenses and minimal growth in gross written premiums. A.M. Best expects CLICE's combined ratio to stabilize at about 97% as the business expansion begins to bear fruit.
A.M. Best believes that the modest business growth in 2007, coupled with full earnings retention and reinsurance cessions to an affiliate, will see risk-adjusted capitalisation return to pre 2006 levels. CLICE's risk-adjusted capitalisation fell sharply in 2006 following strong gross written premium growth of approximately 25%, coupled with a significant reduction in retained earnings following the one-off losses. These losses highlight the need for a significant improvement in CLICE's risk management systems and processes. Credit risk arising from increased reinsurance recoverables will be kept low due to the funds being withheld by CLICE. A.M Best believes that risk-adjusted capitalisation will remain stable longer term, supported by modest growth and a policy of earnings retention to support the capital position.
For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
