LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Bankers Assurance S.A.L. (Bankers) (Lebanon). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Bankers’ balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
Bankers’ balance sheet strength is underpinned by its risk-adjusted capitalisation, which remained at the strongest level at year-end 2018, as measured by Best's Capital Adequacy Ratio (BCAR). AM Best anticipates prospective risk-adjusted capitalisation to remain at the strongest level over the medium term, supported by good earnings and a prudent dividend policy. The balance sheet strength assessment also reflects the company’s conservative and highly liquid investment portfolio, together with its moderate dependence on reinsurance. Offsetting the balance sheet strength assessment is the continued concentration of investments in Lebanon, which exposes Bankers’ risk-adjusted capitalisation to potential volatility given the country’s elevated levels of economic and financial system risk.
Bankers has a track record of strong operating performance and a good balance of earnings between underwriting and investment returns, with the company reporting a five-year (2014-2018) average return on equity of 15.0%. The company’s non-life operations have generated strong technical profitability, as evidenced by a five-year (2014-2018) average combined ratio of 93.6%. The life portfolio also contributes to the combined technical earnings, with a technical result before management expenses of LBP 8.2 billion (USD 5.4 million) reported in 2018.
Bankers benefits from a good local market position, as the second largest insurer in Lebanon, with a leading position in the non-life segment based on an estimated 9.4% share in 2018. The company benefits from a diversified underwriting portfolio by product, across the life and non-life segments, and established distribution channels. Bankers operates solely in Lebanon, and the limited business profile assessment factors in the company’s geographical concentration and exposure to the highly competitive and fragmented local market.
Bankers’ operations in Lebanon also expose the company to heightened levels of economic, political and financial system risks. Despite the company’s track record of strong operating performance in challenging market conditions, the potential for significant business disruption and volatility remains elevated. AM Best will continue to monitor developments in Lebanon and assess any impact on the company.
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