Best’s News & Research Service - October 27, 2022 09:32 AM (EDT)
AM Best Upgrades Credit Ratings of Gulf Insurance Limited
- October 27, 2022 09:32 AM (EDT)
Oldwick //BestWire// - AM Best has upgraded the Financial Strength Rating (FSR) to B+ (Good) from B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb-” (Good) from “bb” (Fair) of Gulf Insurance Limited (Gulf) (Trinidad and Tobago). The outlook of these Credit Ratings (ratings) has been revised to positive from stable.
The ratings reflect Gulf’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The upgrades reflect the change in AM Best’s view, from negative to neutral, on the impact to Gulf’s balance sheet from its holding company, Assuria N.V. (Assuria) (Suriname). Assuria is domiciled in Suriname, a country subject to high degree of economic, financial and political risks. However, Assuria has demonstrated an ability to grow, retain capital and support its subsidiaries despite the challenging economic environment. Assuria mitigates its transfer and convertibility risks within its domicile by holding a material share of its financial assets in various lower risk jurisdictions. Additionally, Gulf has not paid dividends to Assuria since it was acquired.
The balance sheet strength is indicative of Gulf’s ability to maintain the strongest level of risk-adjusted capitalization, as measured by Best Capital Adequacy Ratio (BCAR), over the past four years. Risk-adjusted capital has strengthened over the past couple of years as earnings growth led to higher capital and surplus levels. Balance sheet strength is supported further by a highly liquid and conservative investment portfolio, predominantly composed of fixed-income securities and short-term deposits in various currencies, and no exposure to higher risk assets. Furthermore, Gulf has a reinsurance structure, composed of highly rated insurers, at various levels across all its segments, which significantly reduces its retention for catastrophe events and protects capital and surplus.
The revision of the outlooks reflects stability in Gulf’s operating performance. Gulf delivered consistently improving underwriting results, modest but favorable investment income, and solid top line growth. Profitability metrics have improved significantly over the past five years with an average combined ratio 87.9%, and average return-on-equity and return-on-revenue ratios of 11.4% and 13.6%, respectively. Premium development has been consistent across its multiple business segments but with a more pronounced growth in its property business. Underwriting gains have been outperforming industry peers, setting a new record high over the past three years; this reflects solid underwriting practices, as well as solid claims management, coupled with some technology innovations in its payment system to create efficiencies.
AM Best views Gulf’s business profile as limited. While the company provides a wide range of insurance products in the Eastern Caribbean, primarily personal and commercial property and auto, it remains concentrated in about eight territories. These are mainly mature markets with increasing competition from domestic and regional insurers, which adds pressure on business retention and market share. In addition, the company remains exposed to various regulatory risk in the territories in which it operates. However, Gulf benefits from its name recognition and solid reputation built over nearly 50 years. The company’s risk management capabilities are deemed to be appropriate, although a formal ERM framework continues to evolve.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.