AM Best has revised the outlook of Guild Insurance to stable from negative, saying its balance sheet and operating fundamentals are benefitting from increased certainty over exposure to covid-related business interruption (BI) claims.

The ratings agency affirmed Guild’s financial strength rating of A- (Excellent) and long-term issuer credit rating of a-.

Guild has held provisions for potential covid-related claims arising mainly from BI cover. In February the Full Court of the Federal Court “substantially agreed” with an earlier finding in the Insurance Council of Australia’s (ICA) second test case on covid and business interruption cover which was for the most part in favour of the insurers.

“Following the latest judgments in a series of legal proceedings in Australia, the company has gained increased certainty on these policy coverages, and subsequently released a large part of its covid -related provisions as at March 31 2022,” AM Best said.

“Guild’s underwriting profit and net income are expected to benefit from a significant reduction in these provisions during fiscal year 2022.”

Guild had gross premiums of $236 million in 2021. While its market share is below 1%, it is a leading provider of insurance to allied health professional associations, supported by its direct access to members of its parent, The Pharmacy Guild of Australia (PGOA).

Guild’s balance sheet is “very strong”, AM Best said, and it has an adequate operating performance, neutral business profile and appropriate enterprise risk management.

AM Best expects improved profits driven by pricing adjustments and increased operational efficiency over the medium term. It views Guild’s business profile as “neutral”.