The Tribune

Bahamas First’s “favourable operating performance” amid COVID-19’s economic stresses saw its credit and financial strength rankings upheld by the top global insurance rating agency.

AM Best affirmed both the financial strength rating of “A-” (Excellent), and long-term issuer credit ratings of “a-”, for the Bahamian property and casualty underwriter’s operating subsidiaries, Bahamas First General Insurance Company (BFG) and Cayman First Insurance Company (CFI). The outlook for both these ratings is stable.

“The affirmation of our A- rating and stable outlook is an important recognition of our consistent financial performance even during these uncertain economic times,” said Patrick G Ward, Bahamas First Holdings’ group president and chief executive.

“AM Best’s continued positive assessment of our financial strength attests that the Bahamas First group is well-capitalised with a promising outlook for growth and success well into the future, and gives policy owners and shareholders the assurance that we will continue to be here for them to deliver on the promises we’ve made.”

AM Best’s ratings were based on an analysis of the group’s consolidated balance sheet strength, which AM Best described as “strongest”, as well as the its operating performance, business profile and enterprise risk management.

“The group’s operating performance in 2020 was favourable despite an economic shutdown in The Bahamas and Cayman Islands from the COVID-19 pandemic,” AM Best found. “Overall earnings are primarily driven by the property and motor lines of business in The Bahamas, and the health and motor lines of business in the Cayman Islands.

“The motor lines of business in both operating territories benefited significantly from lower motor claims as a result of government restrictions due to the pandemic. 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 metrics.”

Turning to the balance sheet, AM Best said Bahamas First’s underwriting gains in 2020 were partially offset by unrealised losses caused by a reduction in the value of its Commonwealth Bank holdings due to the decline in the latter’s share price.

“The balance sheet strength is derived from the group’s risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). This assessment is partially offset by high reinsurance dependence to protect surplus and earnings in the event of major catastrophic events,” AM Best added of Bahamas First.

“During 2020, continued surplus growth was primarily driven by underwriting gains at Bahamas First General and Cayman First, partially offset by unrealised losses on the Commonwealth Bank equity holdings. Furthermore, capital growth continues to be constrained because of the operating companies’ continuing obligation to pay dividends to Bahamas First Holding to service its outstanding debt.”

Bahamas First geographical and product diversification has also enabled it to mitigate the annual threat to earnings posed by major hurricanes, AM Best said, describing the company’s business profile as neutral.

“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 stabilise earnings through market cycles and reduce the impact of catastrophic events,” AM Best said.

“Although somewhat volatile due to catastrophes, AM Best anticipates that the group will continue to produce favourable earnings in non-catastrophe years, and that its risk management capabilities and comprehensive reinsurance programme will continue to keep its balance sheet strength at the strongest level.”