AM Best has affirmed the financial strength rating of A (Excellent) and the long-term issuer credit rating of “a” (Excellent) of Bermudian-based Associated Electric & Gas Insurance Services Limited.

The outlook of these credit ratings is stable.

The ratings reflect Aegis’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Aegis focuses on risk diversification and capital preservation, which have been achieved through a successful combination of its energy mutual operations in the United States and uncorrelated lines of business with its Lloyd’s Syndicate 1225.

AM Best said Aegis continued to maintain the strongest level of risk-adjusted capitalisation, as measured by Best’s capital adequacy ratio, supported by consistent surplus growth over the past 10 years.

Aegis’s historical focus on the US and Canadian utility industry has resulted in unfavourable loss experience in certain lines of business, although the diversification benefit from its Lloyd’s syndicate has continued to stabilise underwriting performance.

Management continues to focus on the company’s operating performance by improving its risk management strategies, including premium rate adjustments and continued refinement of its underwriting criteria, as well as the prudent use of available reinsurance protection and modest limits.

Aegis continues to have a high member retention ratio, an adaptive and highly responsive management team, and continued expansion of programmes within its corporate mission.

Factors that could lead to positive rating actions for Aegis are sustained favourable underwriting metrics, supported by strong internal capital generation.

Factors that could affect the ratings negatively are increased underwriting volatility, significant investment losses and outsized catastrophe events in conjunction with a decline in the company’s risk-adjusted capitalisation.