LONDON–(BUSINESS WIRE)–AM Best has removed from under review with positive implications
and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the
Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” of GBG Insurance
Limited (Guernsey). The outlook assigned to the FSR is stable, whilst
the outlook assigned to the Long-Term ICR is positive. GBG Insurance
Limited is a wholly owned subsidiary of GBGI Limited (GBGI), its
non-operating holding company, which consolidates the GBG group (GBG).
The Credit Rating (rating) actions follow the close of the acquisition
of GBGI by Elm Bidco, L.P. (Bidco) on 20 February 2019, and the
completion of AM Best’s analysis of GBG’s revised business plans and
their impact on its rating fundamentals. Bidco is a Cayman
Island-exempted limited partnership that is controlled by affiliates of
Further Global Capital Management, L.P., a firm that manages private
equity funds that invest in the financial services industry.
The positive outlook assigned to the Long-Term ICR reflects AM Best’s
expectation that GBG’s balance sheet strength will improve in the medium
term due to strengthening of its risk-adjusted capitalisation.
Additionally, there have been a number of new appointments in the
company’s leadership team, which could lead to improvements in its
enterprise risk management (ERM).
The ratings reflect GBG’s balance sheet strength, which AM Best
categorises as strong, as well as its strong operating performance,
limited business profile and marginal ERM.
GBG’s balance sheet strength is underpinned by risk-adjusted
capitalisation, which AM Best expects to be maintained at the strongest
level in the medium term, as measured by Best’s Capital Adequacy Ratio
(BCAR), supported by the retention of future earnings. Partially
offsetting factors are GBG’s relatively small capital base and moderate
dependence on reinsurance. The company’s risk-adjusted capitalisation
was lower than anticipated at year-end 2018 but recovered in the first
quarter of 2019 to a level comfortably above minimum requirements for
the strongest assessment, benefiting from a USD 10 million capital
injection by the new shareholders.
GBG has a track record of producing strong operating results, as
demonstrated by its weighted average combined ratio of 92.1% and a
return on equity of 17.1%, reported between financial years 2015 to
2018. The company has reported an elevated expense ratio of
approximately 43% in each of the past two years, due to the impact of
one-off events and non-recurring fees, some of which are expected to
continue into 2019. Nonetheless, underlying profitability remains
strong, and AM Best expects GBG’s technical results to return to a
normalised level in the medium term, with a combined ratio in the
mid-90s range. Investment results are modest in view of the company’s
conservative asset allocation.
AM Best’s assessment of GBG’s business profile reflects its relatively
small, but growing, size and its low-risk insurance portfolio comprising
of short-tail health and life products. The company maintains good
geographical diversification but faces material competition from larger
international players.
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.
AM Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.
Contacts
Valeria Ermakova
Senior Financial Analyst
+44
20 7397 6269
[email protected]
Salman
Siddiqui
Associate Director, Analytics
+44 20
7397 0331
[email protected]
Christopher
Sharkey
Manager, Public Relations
+1 908 439
2200, ext. 5159
[email protected]
Jim
Peavy
Director, Public Relations
+1 908 439
2200, ext. 5644
[email protected]
