SINGAPORE--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Bangkok Insurance Public Company Limited (BKI) (Thailand). The outlook of these Credit Ratings (ratings) is negative.
The ratings reflect BKI’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
BKI’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation that remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Capital adequacy is supported by the company’s low net underwriting leverage, albeit partially offset by a high-risk investment portfolio comprised of large and concentrated holdings in domestic equities. Over recent periods, BKI’s reported shareholders’ equity has exhibited a declining trend due to unrealised fair value losses arising from available-for-sale investments. Other balance sheet considerations include the company’s robust regulatory solvency and its moderate dependence on reinsurance to manage exposure to catastrophe events, accumulations and large single risks.
AM Best views the company’s operating performance as strong, as evidenced by a five-year average return-on-equity ratio of 7.4% and operating ratio of 79.1% (2016-2020). Despite the company’s performance having remained resilient to-date, underpinned by both strong underwriting performance and positive investment income, the persisting COVID-19 environment and competitive market conditions are expected to pressure these performance metrics over the near-to-medium term.
BKI’s business profile is assessed as neutral. The company is the third-largest non-life insurer in Thailand with direct written premiums of THB 21.5 billion (USD 720 million) in 2020, equivalent to an 8.5% market share. The company’s portfolio is moderately diversified by line of business, albeit with all business originating from Thailand. AM Best considers the company’s ERM framework to be appropriate given the size and complexity of its operations. The company’s risk management capabilities are assessed typically to be adequate for the profile of key risks.
The negative outlooks reflect AM Best’s expectation of a continued challenging operating environment for BKI over the near-to-medium term, driven by the COVID-19 pandemic and prevailing competitive market conditions. AM Best expects this environment to drive heightened pressure and potential volatility on BKI’s operating performance and balance sheet strength fundamentals.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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