A.M. Best Co. has revised the outlook to negative from stable and
affirmed the financial strength rating (FSR) of A- (Excellent) and
issuer credit rating (ICR) of "a-" of Best Meridian Insurance Company (BMIC)
(Miami, FL). Concurrently, A.M. Best has affirmed the FSR of B++ (Good)
and ICR of "bbb+" of Best Meridian International Insurance Company
SPC (BMIIC) (Cayman Islands). The outlook for these ratings is
The revised outlook for BMIC reflects a significant increase in its
exposure to commercial mortgage loans recorded over the last two years.
Also of note is the concentration of these loans in Florida and the
relatively high allocation to real estate linked assets relative to
surplus. While A.M. Best recognizes the strategy to diversify away from
fixed income investments to improve investment returns, BMIC's entry
into the commercial mortgage market is relatively new. Thus, it will
take some time for A.M. Best to assess the longer-term performance of
the portfolio given its high exposure.
Other negative rating factors include a sharp increase in BMIC's assumed
premiums in 2012 and geographic concentration in certain Latin American
companies where there is financial and politicl instability.
Despite the revised outlook, the ratings of BMIC continue to reflect its
well-established marketing presence and cultural knowledge of Latin
American countries, its continued trend of profitable operating results
in core lines of business and its favorable risk-adjusted capitalization.
The ratings of BMIIC are based upon its consistent profitability, net
premium growth, adequate level of risk-adjusted capitalization and a
demonstrated commitment by the parent company, BMI Financial Group,
Inc. Partially offsetting these strengths is the high level of
deferred acquisition costs reflecting new business growth and the
limited financial resources of its ultimate parent.
Key rating factors that could result in BMIC's outlook returning to
stable include sustainable net premium growth levels while maintaining
profitable operations, continued high risk-adjusted capitalization and
acceptable performance of its commercial mortgages.
Key rating factors that may result in negative rating actions include
increased exposure to mortgage loans or significant non-performance of
the company's newly acquired mortgage loans, a decline in operating
earnings, disruption in its business model in key international markets
or a significant decrease in risk-adjusted capitalization.
The methodology used in determining these ratings is 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. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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