Bangkok--2 Jun--A.M. Best
A.M. Best has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of Bangkok Insurance Public Company Limited (BKI) (Thailand). The outlook for both ratings is stable.
The ratings reflect BKI’s solid risk-adjusted capitalization, continuously profitable operation, and its prominent market profile.
BKI's capital and surplus have more than doubled in the past 10 years, largely supported by its operating profits and appreciation in its equity investments. The company’s risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), is solid and supportive of its current ratings.
BKI’s operating performance has been consistently favorable, except in 2011 and 2012 when the company suffered sizable underwriting losses from flooding. BKI made a turnaround in underwriting in 2013, while maintaining its robust investment results.
With over 65 years of operation in Thailand, BKI has established a strong presence in the local non-life insurance market. The company is one of the leading non-life insurers in Thailand, ranked the third in 2013 in terms of direct premium written.
Offsetting rating factors include BKI’s large equity exposure and the political instability in Thailand. The sizable amount of equity investments exposes BKI to a high market risk. This is further exacerbated by three related holdings representing the bulk of the equities. However, these strategic long-term investments are consistently profitable and are not in the non-life insurance business. Also, the ongoing political unrest has negatively impacted the country’s overall economy and investment market, which could potentially slow down BKI’s future business growth and affect its investment performance.
Future positive rating actions could occur if BKI can continue demonstrating favorable underwriting and investment performance despite the current challenging environment in the country, while maintaining a solid risk-adjusted capitalization level. Negative rating actions could occur if there is a material decline in BKI’s risk-adjusted capitalization level resulting from deterioration in its underwriting results or decrease in its stock holdings value.
The methodology used in determining these interactive ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.