AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) of Bahamas First General Insurance Company Limited (BFG) (Nassau, Bahamas) and Cayman First Insurance Company Limited (CFI) (Cayman Islands), the property/casualty operating subsidiaries of Bahamas First Holdings Limited (Nassau, Bahamas) (BFH). The outlook of these Credit Ratings (ratings) is stable.
The ratings of BFG and CFI reflect the group’s consolidated balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The balance sheet strength is derived from the group’s risk-adjusted capitalization being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). This assessment is partially offset by the group’s high reinsurance dependence to protect its surplus and earnings in the event of major catastrophic events. Surplus growth during 2021 was primarily driven by underwriting gains at BFG; however, this was limited due to dividends paid to BFH to service its outstanding debt, as well as a decrease in overall earnings at CFI compared with prior years. In addition, continued unrealized losses on the group’s Commonwealth Bank equity holdings impacted bottom line surplus.
In non-catastrophe years, the group has a history of solid earnings supported by underwriting gains and investment income, resulting in solid profitability metrics as evidenced by its five-year average return results. The group’s operating performance in 2021 was favorable, primarily driven by the property and motor lines of business in the Bahamas and Cayman Islands, partially offset by an operating loss on the health line of business at CFI. The health line of business is usually a significant contributor to overall earnings for the group; however, increased claims during the year resulted in minimal net income at CFI.
AM Best continues to view the group’s business profile as neutral. Despite operating in highly competitive and mature markets, the group maintains leading market positions and operations in the Bahamas and Cayman Islands, and benefits from product and geographic diversification, which has helped to stabilize earnings through market cycles and reduce the impact of catastrophic events.
The group’s ERM is considered appropriate. The group has an established ERM framework in place along with a risk committee that is responsible for overseeing its ERM guidelines and policies. In addition, AM Best anticipates that the group will continue to produce favorable earnings in non-catastrophe years, and that its risk management capabilities and comprehensive reinsurance program will continue to keep its balance sheet strength at the strongest level.
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