LONDON--(BUSINESS WIRE)--AM Best 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 AM Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
BNI’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), good liquidity and financial flexibility. Offsetting factors include a moderate reinsurance dependence and the reserve strengthening required in 2017 and 2018 following an external actuarial review, which led to more conservative reserving practices for the company. AM Best expects BNI’s BCAR to remain comfortably at the strongest level over the medium term. However, significant exposure to equities and other unlisted securities (BHD 13.5 million, or 64% of shareholders’ equity at the end of 2018) makes the company’s risk-adjusted capitalisation susceptible to volatility.
Although BNI’s operating performance has weakened over the past couple of years, the company has a track record of strong technical and financial profitability, illustrated by a five-year average (2014-2018) combined ratio and return on equity of 93.8% and 10.6%, respectively. After the company’s combined ratio peaked at 106.2% in 2017, management increased rates and took a series of actions to contain claim costs and rationalise the portfolio. As a result, AM Best expects BNI’s technical profitability to improve from 2019 and remain supportive of a strong operating performance assessment through the cycle.
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.
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