A.M. Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of B+ (Good) and a Long-Term Issuer Credit Rating of “bbb-” of SNIC Insurance B.S.C. (c) (Bahrain).
These Credit Ratings (ratings) reflect SNIC’s balance sheet strength, which A.M. Best categorises as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.
The revised outlooks reflect the deteriorating trend in SNIC’s technical results, combined with uncertainty over the company’s ability to execute its new business strategy successfully.
SNIC’s balance sheet strength is underpinned by its risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). This is supported by low underwriting leverage, strong liquidity, no financial leverage and a reinsurance panel of good credit quality. Offsetting rating factors include the company’s high level of reinsurance dependence and the concentration of its investment profile in an affiliated company, Wataniya Insurance Company (Saudi Arabia).
SNIC’s operating performance has benefitted from strong investment performance in recent years, driving a five-year (2013-2018) average return on equity of 3.5 per cent. In 2017, technical performance deteriorated as a result of a shift toward lower margin business and strengthening of technical provisions. SNIC’s technical performance remains constrained by its limited ability to attract quality business in tough market conditions, coupled with its high expense base relative to its scale. A.M. Best expects SNIC’s long-term performance to improve because of its new business strategy; however, over the medium term, the increased level of capital expenditure is expected to place further strain on the company’s operating performance.
SNIC is an insurance subsidiary of E.A. Juffali & Brothers, a family owned conglomerate operating in Saudi Arabia. The company benefits from support and technical guidance provided by its other shareholders, Munich Reinsurance Company and Zurich Insurance Company Limited. SNIC’s business profile remains focused on general insurance and medical health care insurance. The company’s revenues benefit from some regional diversification, with its direct Bahraini business supplemented by inward facultative business from neighbouring markets. Despite SNIC’s access to regional markets, its business profile remains limited, with a declining trend in gross written premium witnessed over the last three years.