SINGAPORE--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Royal Insurance Corporation of Bhutan Limited (RICB) (Bhutan). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect RICB’s adequate risk-adjusted capitalization, established business profile within its domestic market and track record of strong operating performance. RICB is the larger of the two insurance companies in Bhutan, holding a dominant share of the country’s non-life market and a monopoly in its life insurance market.
The company’s strong operating performance is driven primarily by its favorable investment income and positive underwriting results. Investment income comprises primarily interest income from RICB’s sizable portfolio of loans and advances.
These positive rating factors are offset partially by a high debt leverage ratio, which increased in 2016. As a non-deposits-taking institution, RICB funds its lending activities through debt issuance and borrowings. This exposes the company to liquidity and interest rate risks, which could be amplified under stressed capital market conditions. However, these risks are mitigated partly by collaterals and RICB’s prudent loan-to-valuation method.
Positive rating actions could result if RICB lowers its debt leverage ratios while maintaining overall operating profitability. Negative rating pressure could result if risk-adjusted capitalization deteriorates as a result of adverse operating performance or credit write-offs.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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