Best Affirms Rating for Pioneer Insurance Co.

A.M. Best Co. has affirmed the financial strength rating of B+ (Very Good) of Pioneer Insurance Company Limited (Pioneer) (New Zealand). The rating outlook is stable.

The rating reflects Pioneer’s strong business growth, improved underwriting performance, highly liquid investment portfolio and prudent capitalization.

Pioneer has experienced strong business growth since its incorporation in 2004. Gross premiums written increased in fiscal year 2004. The company achieved a net profit in fiscal year 2004, compared to a small loss in the previous year.

Pioneer improved its underwriting result in fiscal year 2004. The company’s loss ratio stood at a manageable level during the year. Pioneer continued to maintain a relatively low expense ratio, benefiting from the continued support of its stakeholders in sales, marketing and claims management.

As of fiscal year 2004, Pioneer maintained a highly liquid investment portfolio. Cash and short-term deposits accounted for more than 70% of the company’s total assets.

Best’s Capital Adequacy Ratio, which measures capitalization on a risk-adjusted basis, demonstrated Pioneer was adequately capitalized in fiscal year 2004. The reinsurance arrangements with Munich Reinsurance Company New Zealand Branch are also deemed to be conservative for Pioneer’s risk exposures.

Offsetting factors include the capital requirement to support the company’s business expansion plan and the intense competition within New Zealand’s insurance market.

Pioneer expects to have an aggressive business expansion during fiscal year 2005. As a start-up motor insurer with limited underwriting experience, the company’s ability to sustain a profitable underwriting performance remains uncertain. Ongoing capital support is crucial for Pioneer to facilitate its rapid growth in the future.

The intense competition in New Zealand’s non-life insurance market will challenge Pioneer to have a stronger market presence in the mid to long-term.