S&P ratings On Wesfarmers' Insurance entities affirmed
Standard & Poor 's Ratings Services has affirmed its issuer credit and insurer financial strength ratings on Wesfarmers Federation Insurance Ltd. (WFI; A-/Stable/--), Lumley General Insurance Ltd. (LGI; A-/Stable/--), and Lumley General Insurance (N.Z.) Ltd. (LGNZ; A-/Stable/--), reflecting the entities good market positions in their defined niche sectors, and consistent strong track records of underwriting and operating profitability.
The ratings also reflect their ownership by the large Australia-based diversified industrial conglomerate, Wesfarmers Ltd. (Wesfarmers; A-/Stable/A-2). The outlooks on all three entities remain stable.
According to Standard & Poor's Ratings Services, the main focus of the Wesfarmers group on achieving satisfactory return-on-capital targets, which is to a degree facilitated by the entities maintaining marginal capital levels, moderates the ratings on the entities. The companies would also be challenged to achieve significant organic growth in the near term as competition increases in their respective markets.
WFI has a long history and connection to the Australian rural sector, underpinned by alliances with several agricultural, small business, and commercial organizations including its good alliance with the Australian Wheat Board/Landmark. This good niche position has ensured a loyal customer base over the years for the company.
LGI's strength lies in its position in the Australian commercial motor market, as it maintains a high level of customer loyalty due to its customer service culture and specialized product suite.
Based in New Zealand, LGNZ focuses on risks that require specialized underwriting skills, particularly in the commercial motor, engineering, liability, and marine market segments. It has also diversified into other lines such as commercial property, and provides private home and motor insurance products to the customer base of the New Zealand branch of Westpac Banking Corp. (Westpac).
The stable outlook on all three entities reflects that on Wesfarmers. Despite challenging growth pressures due to increased competition, the entities are expected to maintain their better underwriting and operating performances, underpinned by their strong niche positions, as well as their strengthening alliances and agency agreements.
4-May-2007