AM Best Removes From Under Review With Developing Implications and Affirms Credit Ratings of Solidarity Bahrain B.S.C.

BY Business Wire | CORPORATE | 11/18/22 08:49 AM EST

LONDON--(BUSINESS WIRE)-- AM Best has removed from under review with developing implications and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of ?bbb+? (Good) of Solidarity Bahrain B.S.C. (Solidarity Bahrain) (Bahrain). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Solidarity Bahrain?s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). The ratings also consider, in the form of lift, Solidarity Bahrain?s strategic importance to its parent company, Solidarity Group Holding BSC (c) (SGH), a leading provider of Islamic insurance solutions in Bahrain and Jordan.

These rating actions follow the completed acquisition by Al Salam Bank B.S.C. (Al Salam) of Ithmaar Holding B.S.C.?s majority share (55.9%) in Solidarity Bahrain?s intermediate parent, SGH. In AM Best?s view, the change in Solidarity Bahrain?s ultimate parent does not materially impact the credit fundamentals of the company or SGH, as their financial structures, strategic targets and management teams remain unchanged following the transaction.

Solidarity Bahrain?s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best?s Capital Adequacy Ratio (BCAR). Risk-adjusted capitalisation is assessed on a combined basis, including both its policyholders? and shareholders? funds, due to the strength of local regulation and the resulting expectation that the shareholders? fund would have to support the policyholders? fund if required. AM Best expects the company?s prospective risk-adjusted capitalisation to remain comfortably above the minimum required for the strongest assessment following the acquisition and subsequent merger, in January 2022, of T'Azur Company B.S.C. (c) (T'Azur). Solidarity Bahrain?s balance sheet strength benefits from a very good level of liquidity and good financial flexibility. Partially offsetting factors include the dependence on third-party reinsurance and the concentration of assets in Bahrain and the Gulf Cooperation Council, which has the potential to introduce volatility into the company?s capital base.

The company has a track record of adequate operating profitability, demonstrated by a five-year (2017-2021) weighted average return-on-equity (ROE) ratio of 10.1%. Operating profitability is supported by positive technical earnings and moderate investment income. In 2021, the company reported an ROE of 11.8% (2020: 11.7%). Similar levels of profitability are expected over the medium term, as a result of the company?s continued focus on technical discipline.

Solidarity Bahrain is a leading insurer in Bahrain, with gross written contributions of BHD 46.8 million (USD 84.4 million) in 2021. The completed merger with T?Azur is expected to strengthen the company?s position in the market. However, the company?s concentration to Bahrain?s highly competitive and small insurance market is an offsetting factor in the company?s business profile assessment.

This press release relates to Credit Ratings that have been published on AM Best?s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best?s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best?s Credit Ratings. For information on the proper use of Best?s Credit Ratings, Best?s Performance Assessments, Best?s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best?s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright ? 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Source: AM Best

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