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 its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), robust liquidity and a well-diversified investment portfolio by asset class. Offsetting factors include a relatively onerous dividend policy and moderate reinsurance dependence. Reserve strengthening was required in 2017 and 2018 following an external actuarial review and led to more conservative reserving practices being adopted by the company. AM Best expects BNI’s risk-adjusted capitalisation to remain at the strongest level over the medium term, despite the company’s elevated exposure to equities, real estate and other unlisted securities (56% of shareholders’ equity at the end of 2019), which exposes capital adequacy to potential volatility.
BNI’s operating performance weakened in 2017 and 2018 as a result of reserve strengthening, but reverted in 2019 to a strong level, demonstrated by a robust combined ratio of 88.0% (compared with 106.2% in 2017) and a return on equity of 17.3%. AM Best expects the company’s prospective returns to be at a similar level to 2019.
BNI has a well-established franchise as one of the largest non-life insurance companies in Bahrain, where it holds a leading market position in the motor line of business. Although BNI benefits from a strong brand and good reputation locally, the company’s business profile assessment is constrained by its concentration in Bahrain, which has a small insurance market that offers only limited profitable growth opportunities.
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