LONDON:has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” of The Bahrain National Insurance Company BSC (c) (BNI) (Bahrain). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect BNI’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
BNI’s very strong balance sheet is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), a high degree of liquidity and a well-rated reinsurance panel. BNI’s capital requirements in BCAR continue to be driven by asset risk. Whilst the company has significant exposure to equities and other unlisted securities (34% of the total investments at the end of 2017), its investment portfolio is considered to be well-managed and diversified in terms of asset class and geographical distribution.
Although underwriting performance has weakened in recent years, BNI has a track record of strong technical and financial profitability, illustrated by a five-year average (2013-2017) return on equity and combined ratio of 11.8% and 91.4%, respectively. In 2017, a significant reserve strengthening of BHD 2.2 million, driven by revised inflation assumptions, led to an underwriting loss of BHD 0.9 million (USD 2.3 million). The technical loss was offset by improved investment earnings, enabling BNI to report a marginally positive net profit of BHD 0.2 million (USD 0.4 million). In order to restore technical profitability, management has increased rates and taken actions to contain claim costs. In addition, it has improved its reserving processes. Consequently, A.M. Best expects that, despite the persistent competitive market pressures in Bahrain, BNI’s operating performance will revert to a strong level in the near to medium term.
With an estimated 15% market share in 2017, BNI has a well-established franchise in its domestic insurance market, which is underpinned by its leading position in the motor line of business. Although it benefits from a strong brand and good reputation locally, the company’s business profile is constrained by its concentration in Bahrain, which has a small insurance market that offers only limited growth opportunities.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.
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