Motors Insurance credit ratings affirmed by AM Best with stable outlook

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Motors Insurance rating affirmed

Highlights

AM Best affirmed Motors Insurance Company Limited's Financial Strength Rating of A- (Excellent) and Long-Term Issuer Credit Rating of 'a-' with a stable outlook.
MICL maintains very strong balance sheet strength with risk-adjusted capitalisation at the strongest level, though excess capital buffers are expected to decrease moderately due to ongoing dividend payouts.
MICL achieved a five-year weighted average return on equity of 11.5% and a combined ratio of 91.6% (2021-2025), maintaining a stable competitive position in the UK auto warranty market.

Rating rationale and capital position

As reported by AM Best, the rating agency affirms the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" (Excellent) for Motors Insurance Company Limited, a UK insurer owned by AmTrust International Insurance, Ltd., within the AmTrust Group. The outlook on both ratings remains stable.

AM Best says the ratings reflect MICL's very strong balance sheet strength, strong operating performance, limited business profile and appropriate enterprise risk management. The agency adds that the insurer's risk-adjusted capitalisation remains comfortably at the strongest level under Best's Capital Adequacy Ratio, supported by prudent reserving practices and a low-risk investment portfolio.

Over the medium term, AM Best expects excess capital buffers above the strongest threshold to reduce moderately because the company is likely to continue upstreaming surplus capital to the group through a series of dividend payouts. It says MICL's moderate dependence on reinsurance and its concentration with a single reinsurance counterparty are partly offset by that counterparty's excellent credit quality.

UK auto warranty market position

MICL posts a five-year weighted average return on equity of 11.5% for 2021 to 2025, while its five-year weighted average combined ratio stands at 91.6%, according to AM Best's calculations. The agency says earnings are supported by solid underwriting profits across the cycle, helped by prudent pricing and profit-sharing arrangements with motor manufacturers.

The insurer writes auto warranty and auto add-on policies that are distributed mainly through retail intermediaries. AM Best says MICL holds a well-established competitive position in the UK auto warranty market, which generates most of its revenue, and it expects the company's book of business to remain relatively stable.

For the wider UK insurance sector, the affirmation signals continued resilience in a niche motor-related segment where underwriting discipline, conservative investment allocation and capital management remain central to rating stability.

Our earlier coverage of Unity Trust Bank’s rating affirmation outlined how its investment-grade standing was maintained on the back of a niche UK business-banking model, stable funding and solid capital metrics. We also noted the key constraints highlighted at the time, including sensitivity to interest-rate shifts and pressure on profitability, even as asset quality indicators and capital ratios remained robust.

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