The ratings reflect Pacific’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). These ratings also factor in a neutral holding company impact from Pacific’s ultimate ownership by Badger Mutual Wealth (Pty) Ltd (the Badger group), an insurance group domiciled in the Republic of South Africa.
Pacific’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was assessed at the very strong level as at fiscal year-end 2021, as measured by Best’s Capital Adequacy Ratio (BCAR). Since its acquisition by the Badger group in May 2018, Pacific has received a series of capital injections to bolster capital adequacy and support the company’s material change in operational scope. Notwithstanding this, AM Best expects Pacific’s risk-adjusted capitalisation to decline over the near term as a result of its planned underwriting growth. AM Best also anticipates that Pacific’s capital adequacy will remain highly sensitive to the successful execution of its business plan, and to the achievement of performance targets and projected capital generation over the medium term.
Pacific reported operating losses with combined ratios above 100% over the last two fiscal years, primarily driven by elevated transitional expenses as the company brought on board at renewal a sizeable motor portfolio and made significant investment to support its market positioning following the acquisition by the Badger group. As the company’s operational scale expands in the coming years, AM Best expects Pacific’s expense ratio to trend lower and for the company to start to report underwriting profits from fiscal year 2022 onward. However, given the high level of projected premium growth, prospective profitability remains contingent upon the successful execution of the business plan and achievability of its performance targets.
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