SINGAPORE--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of Royal Insurance Corporation of Bhutan Limited (RICB) (Bhutan). The outlook for each rating is stable.
The rating affirmations reflect RICB’s adequate risk-adjusted capitalization, favorable operating performance and well-established presence in its domestic market. RICB maintains a dominant market profile as Bhutan’s only life insurer and also maintains a leading non-life market position with a two-thirds share of overall premium.
Stable and favorable investment returns, derived from a sizable portfolio of loans and advances, has been a major contributor to the company’s overall operating profitability. Additionally, earnings have benefited from a steady stream of commission income, as well as risk diversification from a varied and growing premium base.
An offsetting rating factor is a high debt leverage ratio. As a non-banking institution, RICB’s lending activities are funded by bank borrowings and debt issuance. As a result, RICB could be exposed to earnings volatility in relation to interest rate fluctuations. Additionally, loans and advances form a significant portion of RICB’s assets, which may pose liquidity risk under stressed capital market conditions. However, these risks are partially offset by prudent loan-to-value ratios along with individual borrower diversification.
Positive rating actions could result from reduced financial leverage while maintaining overall operating profitability. Negative rating pressure could result from declining levels of risk-adjusted capitalization due to deterioration in operating performance or credit write-offs.
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