SINGAPORE--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to B- (Fair) from B+ (Good) and the Long-Term Issuer Credit Rating to “bb-” from “bbb-” of Royal Insurance Corporation of Bhutan Limited (RICB) (Bhutan). Additionally, AM Best has placed these Credit Ratings (ratings) under review with negative implications.
The rating downgrades reflect a deterioration in AM Best’s view of RICB’s balance sheet strength fundamentals. While RICB has yet to finalize its year-end 2018 financial statements, AM Best expects the company to record an operating loss for the year, driven by a provision held against non-performing loans arising from its credit finance business. The impact of the operating loss is anticipated to result in a significant reduction in RICB’s reported shareholders’ equity, which AM Best expects will lead to weakened risk-adjusted capitalization at year-end 2018, as measured by Best’s Capital Adequacy Ratio (BCAR). In addition, the latest rating actions reflect concern over the company’s liquidity position and its ability to strengthen its capital base, as well as to comply with local regulatory solvency requirements.
The under review with negative implications status reflects the uncertainty that remains around the finalization of RICB’s year-end 2018 financial position and prospective expectations. In order to resolve the under review status, AM Best expects to conduct a full assessment of RICB’s 2018 and forward-looking balance sheet strength and operating performance fundamentals. In addition, AM Best will undertake a further review of the company’s risk management practices and consider any remedial actions being implemented to manage its exposure to non-performing loans.
The ratings reflect RICB’s balance sheet strength, which AM Best categorizes as adequate, as well as its strong operating performance, neutral business profile and marginal enterprise risk management.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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