A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of "bbb+" of The Bahrain National Insurance Company BSC (c) (BNI) (Bahrain). The outlook for both ratings is stable.
The ratings reflect BNI's overall robust operating performance, strong level of risk-adjusted capitalisation and leading domestic franchise.
BNI has maintained strong operating results producing earnings of BHD 3 million (USD 9 million) in 2013, driven by improved technical profitability with a reported loss ratio of 58.4% (2012: 60.0%). Based on interim results, the company is likely to maintain strong underwriting profitability in 2014, driven by its ability to preserve profitable rates on its motor portfolio while increasing the proportion of commercial risks underwritten in the domestic market, which benefit from high inward reinsurance commission. This strategic decision to refocus on the domestic market reflects BNI's desire to grow its profile and scale in areas where it has solid expertise and a view to take advantage of the expected increase in government-initiated infrastructure projects.
Despite the company's high dividend pay-out ratio, risk-adjusted capitalisation is expected to remain strong, benefiting from low underwriting leverage and a well- rated panel of reinsurers.
Positive rating movement is likely to arise from further growth and diversification of BNI's business profile, coupled with maintaining good risk-adjusted capitalisation and operating performance. Negative rating action could result from a notable and continuous deterioration in the underwriting performance or a material fall in BNI's risk-adjusted capitalisation.