AM Best Revises Outlooks to Stable for Life Insurance Corporation (International) B.S.C. (c)

LONDON--(BUSINESS WIRE)--AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating of “bb” (Fair) of Life Insurance Corporation (International) B.S.C. (c) (LICI) (Bahrain).

These Credit Ratings (ratings) reflect LICI’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and weak enterprise risk management (ERM).

The revision of the outlooks to stable reflects management actions taken in 2022 to address the breach of its regulatory solvency requirement in the United Arab Emirates.

LICI’s balance sheet strength assessment is underpinned by the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s BCAR has strengthened notably over recent years, driven in particular by a capital injection in 2021 from its parent, Life Insurance Corporation of India. Significant prior volatility in LICI’s capital adequacy and its high level of sensitivity to financial markets remain as offsetting balance sheet strength factors. However, AM Best expects the company’s prospective capital adequacy to demonstrate greater resilience following the aforementioned capital injection. A further offsetting balance sheet strength factor is AM Best’s concern over the adequacy of LICI’s asset-liability management capabilities.

LICI has a track record of adequate but volatile operating performance. The company has generally returned positive operating performance results; however, a material loss incurred in 2018 and a break-even result in 2021 have skewed the five-year (2017-2021) weighted average return-on-equity (ROE) to -0.3% (2017-2021). Operating performance has proven sensitive to financial market movements as well as bonus rates credited to policyholders.

LICI benefits from its niche market position, targeting India’s expatriate community in Gulf Cooperation Council states by leveraging its parent’s strong brand in the region, as well as the portability of its policies back to India.

LICI’s ERM framework is assessed as weak, which has been evident through poor capital management capabilities in recent periods. Furthermore, the company’s risk management has proven to be more reactive than proactive, with remedial actions having taken extended periods of time to be executed.

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