OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a” of BF&M Life Insurance Company Limited (BF&M Life), BF&M General Insurance Company Limited (BF&M General) and Island Heritage Insurance Company Limited (Island Heritage) (Cayman Islands). In addition, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of “a-” of Insurance Corporation of Barbados Limited (ICBL) (Barbados). A.M. Best also has affirmed the ICR of “bbb” of the parent, BF&M Limited (BF&M). All companies are domiciled in Hamilton, Bermuda, unless otherwise stated. The outlook for all ratings is stable.
The ratings of BF&M Life and BF&M General reflect their consistently positive net income, solid capitalization, strong market positions and increased business diversification. Overall earnings are primarily supported by BF&M Life’s group health line of business, which over the past three years has benefited from a lower claims level and stable premium base. The capital levels at both companies are more than adequate to support the current level of business and insurance risks. Although Bermuda remains the organization’s largest market, the geographic diversification of business, in particular in the property/casualty (P/C) line, has increased following the Island Heritage acquisition. The planned integration of Bermuda and Cayman P/C operations is expected to produce economies of scale and increase the organization’s overall efficiency. BF&M’s strategy includes further expansion into the Caribbean market with both P/C and life/health products.
Partially offsetting these positive rating factors are lower combined earnings and continuous economic weakness in Bermuda. During 2014, BF&M General’s results were impacted by losses related to Hurricanes Fay and Gonzalo, which hit Bermuda within six days of each other. However, due to strong reinsurance protection, the company posted positive earnings despite the losses. Overall net retained losses for BF&M General from both the Fay and Gonzalo hurricanes in 2014 were estimated at $5.5 million compared with an industry loss estimate for Bermuda of at least $125 million. In addition, the Bermuda market has been impacted by the global economic downturn, which has affected tourism, business growth and property values on the island. More recently, Bermuda’s economy has been impacted by consolidations in the global reinsurance industry. These factors result in limited local market growth opportunities for BF&M Life and BF&M General. In addition, persistent economic weakness negatively impacted BF&M Life’s mortgage holdings and resulted in substantial impairments over the past several years.
The ratings for Island Heritage reflect its strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR) model, excellent profitability in addition to the support and synergies provided by its immediate parent, BF&M General. Partially offsetting these positive factors is the macroeconomic environment in which Island Heritage operates. This includes soft market conditions and competitive market pressures, in addition to being highly exposed to natural catastrophes, which is materially mitigated through comprehensive reinsurance coverage.
The ratings for ICBL reflect the company’s strong risk-adjusted capitalization, low underwriting leverage and solid operating performance. The company’s shares, which are traded on the Barbados Stock Exchange, offer the potential for increased financial flexibility. Partially offsetting these positive factors is ICBL’s concentration of risk in the island of Barbados, which is subject to exposure from severe weather events and macroeconomic pressures such as elevated unemployment levels, high domestic debt and a contracting insurance market.
This press release relates to rating(s) 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 visit A.M. Best’s Ratings & Criteria Center.
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