Credit ratings of Bahrain Kuwait Insurance Company B.S.C. under review with developing implications
A.M. Best has placed the financial strength rating of A- and the long-term issuer credit rating of “a-” of Bahrain Kuwait Insurance Company B.S.C. (BKIC) (Bahrain) under review with developing implications.
These rating actions follow BKIC increasing its shareholding in Takaful International Company B.S.C. (TIC) (Bahrain) to 64 per cent and making an offer to acquire the remaining 36 per cent from minority interest shareholders. BKIC initially acquired 41 per cent of TIC’s shareholding in 2015, and in April 2017 acquired an additional 23 per cent, for a total cash consideration of BHD 1.35 million.
As a result of its increased shareholding in TIC, Bahrain’s capital market regulations required BKIC to make a mandatory offer for the remaining minority interest stake of TIC. The offer, made on 10 May 2017, is for a cash price of BHD 0.095 per share, and is set to expire on 20 June 2017.
BKIC is one of the leading conventional insurers in Bahrain, with additional operations in Kuwait, whilst TIC is the leading takaful operator in Bahrain. A.M. Best understands that BKIC does not intend to change TIC’s status as a takaful operator. The the uncertainty regarding the take-up of BKIC’s offer to minority shareholders and the resulting impact to BKIC’s risk-adjusted capitalisation and operating performance in the medium-term is reflected in the status of being under review with developing implications. Furthermore, the level of integration between the two companies, and BKIC’s ability to manage the execution risk associated with this transaction, will likely be important to the success of this acquisition.
The under-review status is expected to be resolved following the expiration of the offer period and A.M. Best’s assessment of its impact on BKIC’s risk-adjusted capitalisation and prospective operating performance.