SINGAPORE: AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Australia based The Hollard Insurance Company Pty Ltd with stable outlook. These ratings reflect HIC’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM). The company’s balance sheet strength assessment is underpinned by its unconsolidated risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which improved to the very strong level in fiscal-year 2019. AM Best views HIC to have robust financial flexibility, which was demonstrated in recent years through a combination of capital injections totaling AUD 50 million and the issuance of AUD 40 million in subordinated debt for fiscal-years 2018-2019. These actions, combined with full earnings retention, have bolstered HIC’s capital adequacy and supported growth in its underwriting operations. Other balance sheet considerations include the company’s adequate reserving approach, reliance on reinsurance and its exposure to illiquid investments arising from equity holdings in affiliated underwriting agencies. AM Best’s balance sheet strength analysis also incorporates a neutral holding company impact following an assessment of consolidated risk-adjusted capitalization at HIC’s immediate parent, Hollard Holdings Australia Pty Ltd. (HHA). AM Best views HIC’s operating performance as adequate. On an unconsolidated basis, the company has reported operating profits in each of the past five years (fiscal-years 2015-2019), with an average return-on-equity ratio of 5.9%. The company’s equity holdings in strategic and associated underwriting agencies have supported robust, albeit variable, investment returns, which are a key driver of overall earnings at present. HIC’s combined ratio has exhibited an improving trend over recent years, driven by expense ratio improvements as a result of increased operational scale. The combined ratio improved to 99.9% for fiscal-year 2019, compared with 107.0% for fiscal-year 2015 (as calculated by AM Best). As HIC prepares financial statements on an unconsolidated basis, HHA’s consolidated performance also has been considered as part of the operating performance assessment. HHA consolidates the operations of HIC, and all its controlled strategic investments in underwriting agencies. AM Best assesses HIC’s business profile as neutral. The company has grown to be one of the top 10 non-life insurers in Australia based on gross written premiums, albeit occupying a modest market share of 3% in 2019. HIC maintains a strong market position in certain niche segments, including the pet insurance sector. The company continues to target high growth over the medium term, supported by its business model of establishing strategic partnerships with a network of distributors and underwriting agencies. AM Best considers HIC’s ERM as appropriate given the size and complexity of the company’s operations. As a result of HIC’s rapid expansion over recent years, the company is engaged in ongoing strengthening of its risk management capabilities in line with increased operational scale and risk profile.