A.M. Best Assigns Ratings to Bangkok Insurance Public Company Limited [Manufacturing Close – Up]

A.M. Best Asia-Pacific Limited has assigned a financial strength rating of A- (Excellent) and an issuer credit rating of "a-" to Bangkok Insurance Public Company Limited (BKI) (Thailand).

The outlook assigned to both ratings is stable.

The ratings reflect BKI's adequate risk-based capitalization, favorable investment results and its strong market profile.

BKI's capital and surplus has demonstrated a healthy upward trend in the past 10 years. Although BKI has suffered a sizable loss from the Thailand flooding in 2011, the company's capital and surplus still rose in the last two years due to the strong performance of its investment portfolio. BKI's risk-based capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), is adequate and supportive of its current ratings.

BKI's investment portfolio has consistently generated stable income to its bottom line. In the past two years, the company was able to post sufficient investment earnings to offset its underwriting losses from the flooding.

As a related company of the Bangkok Bank, BKI leverages the extensive network of the bank. With over 65 years of operation in Thailand, BKI has established a strong market profile in the country. Although the Thailand property/casualty insurance market is highly competitive, BKI maintained its third position in terms of direct premiums written, capturing a market share of 6.9 percent in 2012.

Offsetting rating factors include BKI's deteriorating underwriting results due to the recent flood loss and its high exposure to stock market volatility.

BKI's underwriting performance in the last two years was significantly impacted by the loss from the severe flood that occurred in the fourth quarter of 2011, which contributed to the combined ratio reaching 124 percent at year-end 2012. As the flood loss has not been completely settled, any future adverse loss development will have a negative impact on BKI's operating results and capitalization. The strong performance of BKI's investment portfolio enabled it to post net profits amid the severe flood loss. However, the sizable amount of equity investment exposed BKI to a high market risk, and the company's future capitalization level will be impacted by the equity market volatility. This is further exacerbated by three related holdings representing the bulk of the equities. However, these long-term holdings are consistently profitable and are not in the non-life insurance business.

BKI is well positioned for its current ratings. Negative rating actions could occur if there is a material decline in BKI's risk- based capitalization level or further deterioration in its underwriting results.

The methodology used in determining these interactive ratings is Best's Credit Rating Methodology, which provides an explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process.

A.M. Best Asia-Pacific Limited is a subsidiary of A.M. Best Company.

A.M. Best Company is an insurance rating and information source.

More Information:

http://www.ambest.com

Best's Credit Rating Methodology:

http://www.ambest.com/ratings/methodology

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