AEGIS Affirmed, Outlook Negative

Fitch affirmed the “AA-” insurer FSR of Associated Electric & Gas Insurance Services Limited (AEGIS) and changed the rating outlook from stable to negative.

The negative rating outlook reflects continued poor operating results, declining underwriting and operating cash flows, uncertainty in relation to the growing Lloyd’s Syndicate business, and uncertainties with respect to possible California utility exposure.

The very strong insurer financial strength rating of AEGIS continues to be bolstered by the company’s positive market position, favorable capitalization profile, and conservative approach to setting loss reserves.

A very competitive and consolidating nature of the utility and related energy industry, together with the soft pricing environment, has led to weak profitability and cash flow strain with operating income in decline since 1997 and negative operating cash flow in 1999 and 2000.