AM Best Affirms Credit Ratings of Life Insurance Corporation (International) BSC (c)

LONDON– (BUSINESS WIRE) –
AM Best confirmed the financial strength rating of B (Fair) and the long-term issuer credit rating of “bb” (Fair) of Life insurance company (International) BSC (c) (LICI) (Bahrain). The outlook for these credit ratings (ratings) is negative.

The ratings reflect the strength of LICI’s balance sheet, which AM Best considers strong, as well as its adequate operational performance, neutral business profile and weak enterprise risk management (ERM).

The negative outlook reflects the company’s continued failure to meet its regulatory solvency requirement in the United Arab Emirates, which could impact its ability to do business there, which is LICI’s primary market.

LICI’s assessment of balance sheet strength is supported by its highest level of risk-adjusted capitalization, as measured by Best’s capital adequacy ratio (BCAR). The company’s BCAR strengthened significantly in 2019 and 2020 after a very low level at the end of 2018, driven by an increase in available capital due to capital gains. LICI’s risk-adjusted capitalization was further strengthened in 2021 thanks to a capital injection by its parent company, Life Insurance Company of India (India). Compensating factors in assessing LICI’s balance sheet strength include significant volatility in its capital adequacy, which is very sensitive to financial markets, as well as concerns about the adequacy of its asset-liability management.

LICI has a track record of adequate but volatile operational performance, with a positive, albeit low, five-year average return on equity (ROE) of 1.6% (2016-2020). The five-year average includes an after-tax loss of 14.2 million BHD incurred in 2018, mainly caused by a decline in the financial markets coupled with bonuses credited to policyholders, which resulted in an ROE of -28% for that year. AM Best expects LICI’s forward-looking performance to revert to historical averages, remaining in favor of its proper valuation over the cycle.

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

LICI’s ERM framework is assessed as weak, due to weak capital management capabilities, demonstrated by the continued violation of regulatory solvency requirements in the United Arab Emirates and by its regulatory solvency margin in Bahrain below management trigger thresholds in early 2020. Enterprise risk management has proven to be more reactive than proactive.

AM Best remains the main rating agency for alternative risk transfer entities, with more than 200 such vehicles rated worldwide. For Best’s current credit scores and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

This press release relates to credit ratings published on the AM Best website. For all rating information relating to the publication and relevant disclosures, including details of the office responsible for the publication of each of the individual ratings referenced in this publication, please see AM Best Recent rating activity Web page. For more information on the use and limits of credit rating opinions, please see Best Credit Score Guide. For more information on the proper use of Best’s credit scores, Best’s preliminary credit reports, and AM Best’s press releases, please see Guide to Proper Use of Best Ratings and Reviews.

AM Best is a global credit rating agency, news publisher, and data analytics provider specializing in the insurance industry. Based at United States, the company operates in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico. For more information visit www.ambest.com.

Copyright © 2021 by AM Best Rating Services, Inc. and / or its affiliates. ALL RIGHTS RESERVED.

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Anna Sheremeteva

Financial Analyst

+44 20 7397 4397

[email protected]

Christophe sharkey
Manager, Public Relations

+1 908 439 2200, ext. 5159

[email protected]

Michael dunckley, CFA

Associate Director

+44 20 7397 0276

[email protected]

Jim peavy
Director, Communications

+1 908 439 2200, ext. 5644

[email protected]

Source: AM Best