Best’s News & Research Service - September 26, 2014 02:29 PM (EDT)
A.M. Best Affirms Ratings of Family Guardian Insurance Company Limited and FamGuard Corporation Limited
Oldwick //BestWire// - A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Family Guardian Insurance Company Limited (Family Guardian). Concurrently, A.M. Best has affirmed the ICR of "bbb-" of FamGuard Corporation Limited (FamGuard) [BISX: FAM] (both domiciled in Nassau, Bahamas). Family Guardian is a wholly owned subsidiary of its publicly traded parent, FamGuard. The outlook for all ratings is stable.
The rating actions for Family Guardian reflect its improving financial performance and adequate reserves specific to its investment in direct residential and commercial loans. While A.M. Best remains concerned regarding the risks associated with Family Guardian's high concentration in mortgage loans relative to its total
equity and the current level of delinquencies in its mortgage loan portfolio, A.M. Best notes that the company's
level of mortgage loans as a percentage of total investment assets, as well as a percentage of total capital, have continued to decline. The company holds mortgage loan provisions, which have proven to be adequate over time; A.M Best considers this risk exposure as manageable at the current time.
Although Family Guardian faces inherent risks associated with its group health division, the company's results in this line of business have stabilized over the past several years. The overall weak economic environment in the Bahamas can present risks to Family Guardian's longer-term financial results and growth opportunities.
A.M. Best recognizes that in spite of the limited growth opportunities in the local market, Family Guardian has recorded growth in premium income in core business lines.
Offsetting these negative rating factors are Family Guardian's more-than-adequate level of risk-adjusted capitalization, overall profitable operating results fueled by stabilization in its group health division and its sustainable marketing presence as one of the two leading life insurance companies in the Bahamas. A.M. Best further notes that the company trends are favorable with respect to profitability and capital with consistent growth in stockholders' equity, despite shareholder dividend payments. Family Guardian's three core business segments--home service, financial services and group division led by BahamaHealth--provide business diversification and competitive advantages in a generally limited and mature marketplace.
A rating upgrade is unlikely in the near term. Downward rating actions could result if a material deterioration were to occur in Family Guardian's operating results, worsening delinquency rates within the mortgage portfolio are recorded or there is deterioration in the Bahamian economic environment.
The methodology used in determining these ratings is A.M. 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. A.M. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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