The ratings reflect RICB’s balance sheet strength, which A.M. Best categorizes as strong, as well as its strong operating performance, neutral business profile and marginal enterprise risk management (ERM).
RICB’s strong risk-adjusted capital position is supported by its investment portfolio, which mainly comprises loans and deposits. The company’s earnings have been consistently positive, derived primarily from its sizable portfolio of loans and advances. The neutral business profile reflects the company’s market-leading position in the relatively small life and non-life markets of Bhutan. RICB is the larger of two insurance companies in the country and holds a monopoly position in the life insurance sector in its domestic market.
Offsetting rating factors include RICB’s ERM, which is assessed as marginal. The company has no developed asset-liability management framework for its life insurance business. The risk of asset-liability mismatches have been heightened by significant growth in RICB’s annuity business in recent years, which increased the company’s reserve leverage ratio to 2.8 times as of Dec. 31, 2017.
Positive rating actions are unlikely in the near term. Negative rating pressure could result if risk-adjusted capitalization deteriorates as a result of adverse operating performance.
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