LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of “bbb” of GBG Insurance Limited (GBG) (Guernsey). The outlook for both ratings is stable.
The ratings of GBG reflect its adequate level of risk-adjusted capitalisation, solid operating performance and developing business profile as a niche provider of international life and health products. Partly offsetting these factors is the negative operating performance of GBG’s subsidiary, Global Benefits Group, Inc. (GBG Inc.).
GBG’s risk-adjusted capitalisation weakened in the financial year ended June 2014, driven by a rise in underwriting leverage and credit risk, which outpaced growth in the company’s shareholders’ funds. Nevertheless, GBG’s capital adequacy, as measured by Best’s Capital Adequacy Ratio, remains supportive of its current rating level and is expected to improve in 2015, despite higher capital requirements due to the company’s strategy to increase its net premium retention ratio.
GBG’s operating performance has been positive in recent years, albeit partially offset by the negative results of GBG Inc., a Californian-based managing general underwriter that markets and administers a range of products exclusively for the group. In the financial year ended June 2014, GBG Inc.’s high expense base resulted in a decline of GBG’s consolidated profits to USD 3 million, from the USD 4 million reported in the previous year. A.M. Best expects GBG’s overall consolidated performance to strengthen in the coming years, as it achieves better economies of scale and expands its operations further in Latin America, Africa, Central and Eastern Europe and other regions.
Positive rating movement could occur in the long term if GBG successfully implements its strategy to improve its competitive position while strengthening its risk-adjusted capitalisation and operating performance. Negative rating actions could occur if the company’s level of risk-adjusted capitalisation were to deteriorate due to unprofitable premium growth or as a result of the sustained weak results of GBG Inc.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilised:
- Analyzing Insurance Holding Company Liquidity
- Catastrophe Analysis in A.M. Best Ratings
- Insurance Holding Company and Debt Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
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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