A.M. Best Co. has upgraded the financial strength rating to B++ (Very Good) from B+ (Very Good) and the issuer credit rating to “bbb” from “bbb-” of Trust International Insurance Company B.S.C. (c) Bahrain (TIIC), an energy and property reinsurer. The outlook for both ratings has been revised to stable from positive.
The rating action reflects TIIC’s improving risk-adjusted capitalization supported by good anticipated retained earnings. However, the company is still highly dependent on retrocession, although net retention on its existing portfolio is likely to increase to approximately 20% in 2005 (compared to 14% in 2004). The company has also entered into a retrospective quota share agreement with one of its subsidiaries, Trust Underwriting Limited, a corporate Lloyd’s vehicle that will be fully retained, increasing TIIC’s net retention to between 30%-35% in 2005.
A.M. Best believes the company is likely to achieve good after-tax profits of approximately USD 8 million in 2005, translating into a return on premium of approximately 8.5% despite an expected deterioration in the combined ratio to 75%. This reflects the softening of the market in the niche business lines where the company operates and the retrospective quota share agreement. TIIC achieved a technical profit above A.M. Best’s expectation in 2004 with a combined ratio of 55.5%.
TIIC is likely to write gross premiums of approximately USD 95 million in 2005 as the company continues to expand its diversified energy and property book in the Arabic countries (which is anticipated to contribute an additional USD 6.5 million).
However, an additional USD 22 million will be written through the retrospective quota share agreement.
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