LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of GBG Insurance Limited (GIL) (Guernsey). The outlook of the FSR is stable, whilst the outlook of the Long-Term ICR is positive. GIL is a wholly owned subsidiary of GBGI Limited (GBGI), its non-operating holding company, which consolidates the GBG group.
These Credit Ratings (ratings) reflect GBG group’s balance sheet strength, which AM Best categorises as strong, as well as its strong operating performance, limited business profile and marginal enterprise risk management (ERM).
The positive outlook on the Long-Term ICR reflects AM Best’s expectation that the group’s ERM practices will improve to a level supportive of its risk profile under the new management team. Additionally, AM Best expects GBG group’s balance sheet strength to improve in the medium term due to further strengthening of its risk-adjusted capitalisation.
GBG group’s balance sheet strength is underpinned by risk-adjusted capitalisation that AM Best expects to be maintained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), supported by the retention of future earnings. Partially offsetting factors are GBG group’s relatively small capital base, which is potentially sensitive to fluctuations in capital requirements and operating losses, and moderate dependence on reinsurance. GBG group benefitted from a USD 11.5 million capital injection by its shareholders, Elm Bidco, L.P. following its acquisition of GBG group on 20 February 2019.
GBG group has a track record of producing strong operating results, although over recent years its performance has been impacted by a number of one off expenses and non-recurring fees. The group has reported a weighted average combined ratio of 96.8% and a return on equity of 10.3% over the four-year period between 2016 and 2019. Nonetheless, underlying profitability remains strong with good loss ratios and AM Best expects GBG group’s technical results to return to a normalised level in the medium term. Investment results remain modest in view of the group’s conservative asset allocation.
AM Best’s assessment of GBG group’s business profile reflects its relatively small, but growing, size and its low-risk insurance portfolio that is comprised of short-tail health and life products. The group maintains good geographical diversification but faces material competition from larger international players.
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