KUALA LUMPUR, March 4 (Bernama) -- Global rating agency focused on insurance industry, AM Best has downgraded the Financial Strength Rating to B- (fair) from B+ (good) and the Long-Term Issuer Credit Rating to ‘bb-’ from ‘bbb-’ of Royal Insurance Corporation of Bhutan Limited (RICB) in Bhutan.
Additionally, the rating agency has also placed these credit ratings under review with negative implications.
The downgraded ratings reflect a deterioration in AM Best’s view of RICB’s balance sheet strength fundamentals.
While RICB has yet to finalise its year-end 2018 financial statements, AM Best expects the company to record an operating loss for the year, driven by a provision held against non-performing loans arising from its credit finance business.
The impact of the operating loss is anticipated to result in a significant reduction in RICB’s reported shareholders’ equity, which AM Best expects will lead to weakened risk-adjusted capitalisation at year-end 2018, as measured by Best’s Capital Adequacy Ratio.
In order to resolve the under review status, AM Best expects to conduct a full assessment of RICB’s 2018 and forward-looking balance sheet strength and operating performance fundamentals.
AM Best will also undertake a further review of the RICB’s risk management practices and consider any remedial action being implemented to manage its exposure to non-performing loans.
-- BERNAMA
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