OLDWICK, NJ–(BUSINESS WIRE)–AM Best Affirmed Caribbean Alliance Insurance Company Limited (CAIC) (Antigua and Barbuda) financial strength rating of A (Excellent) and long-term issuer credit rating of “a” (Excellent). The outlook for these Credit Ratings (ratings) is stable.
The ratings reflect CAIC’s balance sheet strength, which AM Best rates as the strongest, as well as its strong operational performance, neutral business profile and appropriate management of business risks.
Balance sheet strength remains the strongest, based on strong capital and surplus levels and supported by favorable operating results. Risk-adjusted capitalization was found to be the strongest, as measured by Best’s capital adequacy ratio (BCAR), and has strengthened over the past five years as earnings growth led to higher of the level of capital and surplus in the midst of large shareholder dividends. This reflects the company’s ability to ensure that capital and liquidity are maintained at appropriate levels. The strength of the balance sheet is reinforced by a very liquid and prudent investment portfolio composed mainly of short-term deposits in various currencies and no exposure to higher risk assets. In addition, CAIC has a comprehensive reinsurance program structured to protect profits and surplus in the event of a natural disaster. The level of reinsurance protection remains higher compared to its Caribbean counterparts. The level of reliance on reinsurance contacts to cover various levels of losses partially compensates; however, the reinsurance panels are diverse and of excellent credit quality with no litigation history.
CAIC continues to post strong operating results, which reflect strong underwriting revenue growth over the past five years, with 2021 net results outperforming prior year profitability. Underwriting gains were primarily driven by higher ceded commissions, which increased in 2021. These gains are reflected in CAIC’s profitability metrics, with combined ratios and revenue yield reaching 81% and 14%, respectively. . Other factors in the positive results include a low occurrence of losses as well as management’s conservative approach to underwriting. More recently, in 2022, CAIC experienced lower underwriting margins in its automotive business portfolio primarily due to the higher cost of automotive repairs. To address this issue, the CAIC is implementing appropriate pricing measures and reviewing its risk selections.
AM Best considers CAIC’s business profile to be neutral. The company offers a wide range of insurance products in the Eastern Caribbean, primarily personal and commercial property and motor, as well as employee liability and general liability. The company holds one of the top five market shares in 11 of its 16 territories and benefits from the recognition of its name and its solid reputation built over many years. However, the company remains exposed to regulatory risk in the territories in which it operates, as well as to multiple competitors in the region.
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