AM Best

JUNE 20, 2012 12:00 AM (EDT)

A.M. Best Affirms Ratings of Bosna Reosiguranje d.d. Sarajevo

Anna Bender
Financial Analyst
+(44) 20 7397 0306

Deniese Imoukhuede
Senior Financial Analyst
+(44) 20 7397 0277

Rachelle Morrow
Senior Manager, Public Relations
+(1) (908) 439-2200, ext. 5378

Jim Peavy
Assistant Vice President, Public Relations
+(1) (908) 439-2200, ext. 5644


LONDON - JUNE 20, 2012 12:00 AM (EDT)
A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B+ (Good) and issuer credit rating of “bbb-” of Bosna Reosiguranje d.d. Sarajevo (Bosna Re) (Bosnia and Herzegovina). The outlook for both ratings remains stable.

The rating affirmations reflect Bosna Re’s dominant position within its domestic market in Bosnia and Herzegovina (BH), its good operating performance and adequate level of risk-adjusted capitalisation. Offsetting rating factors relate to Bosna Re’s limited business profile and its relatively high proportion of illiquid equity investments. The ratings also consider the recent deterioration in the sovereign creditworthiness of BH.

Bosna Re remains the dominant reinsurer within the small domestic market, supported by its long-standing relationships with cedants, of which some are also shareholders of the company. At year-end 2011, Bosna Re maintained a market share of 85%. Gross written premiums (GWP) remained relatively stable at BM 54 million in 2011 (2010: BM 51 million), reflecting the limited opportunities for growth within BH. Approximately 80% of Bosna Re’s premium volumes originate from BH, with the remainder derived from the former Yugoslavian states, Central Europe and Asia. Growth in the medium term is expected to target expansion in Bosna Re’s neighbouring states. However, A.M. Best believes that Bosna Re faces significant challenges with the execution of its expansion plans owing to its limited profile and the presence of strong competitors within its target markets. Despite the recent decline in economic conditions in BH, A.M. Best believes that Bosna Re’s dominant position within its domestic market will support its ability to sustain its solid rating fundamentals.

Bosna Re’s operating performance remains stable, underpinned by positive technical results and investment earnings. In 2011, Bosna Re reported a pre-tax profit of BM 2.1 million, unchanged from earnings produced in the previous year. Results were supported by a combined ratio of 94.1% (2010: 94.6%) and an investment return of 1.8% (2.0%). Going forward, A.M. Best expects operating earnings to remain at a similar profitable level, reflecting stability in Bosna Re’s business mix and the limited opportunities available to support growth in scale of its operations within its domestic market.

Risk-adjusted capitalisation is expected to remain at a sufficient level to support Bosna Re’s ratings, both on a consolidated and stand-alone basis. Bosna Re’s risk-adjusted capital position is exposed to a risky investment profile, due to the high level of investments in associates and unquoted equities. At year-end 2011, these investments represented 43% and 10% of capital and surplus, respectively, on a consolidated basis. A large portion of these assets relate to investments in cedants, which could have a significant impact on the financial profile of Bosna Re in an extreme market event. A.M. Best will continue to closely monitor Bosna Re’s profitability.

Positive ratings actions are not likely in the near term, in view of the deterioration in the sovereign creditworthiness of BH.

Negative rating actions could occur if there is deterioration in the quality of investments or in Bosna Re’s financial profile, resulting in deterioration in risk-adjusted capitalisation. Additionally, further deterioration in country risk factors associated with the company’s operations in BH could negatively affect Bosna Re’s ratings.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; and “Evaluating Country Risk”. Best’s Credit Rating Methodology can be found at

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.

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AMB# Company Name
088596 Bosna Reosiguranje d.d.