The ratings reflect BNI’s solid risk-adjusted capitalisation, good track record of operating profitability and strong domestic business profile. An offsetting rating factor is the limited growth potential of its domestic market driven by the current low oil price environment.

BNI’s risk-adjusted capitalisation remained solid level in 2014, despite a gradual decline in recent years stemming from high dividend distributions and net premium growth. BNI’s low level of premium retention on commercial risks drives an elevated level of counterparty credit risk in the event of large losses. Accordingly, the company maintains a well-rated reinsurance panel to mitigate against this risk. Prospective risk-adjusted capitalisation is expected to remain supportive of the rating, despite retained earnings being tempered by BNI’s dividend policy.

In 2014, BNI maintained its good track record of profitability, supported by robust technical performance and solid investment returns, with the company recording net income of BHD 3.3 million ($8.9 million).

Consistent underwriting profitability is underlined by a five-year average combined ratio of 85 per cent, benefiting from strong performance on the motor book, as well as inward reinsurance commissions on all other business lines due to high reinsurance dependence. Investment income continues to supplement underwriting performance, demonstrated by a five-year average investment yield of five per cent. The interim results for 2015 are in line with the recent performance trends of the company.

BNI’s strong business profile within Bahrain’s market is reinforced by its leading position in the motor segment, with an estimated market share of 16 per cent and its extensive distribution network. Outside of the motor market, BNI continues to enjoy a good business profile, as one of the largest non-life insurers (excluding medical) in the market, and continues to target large domestic fire and engineering contracts as a key growth driver, in order to increase both profile and operational scale. BNI achieved 19 per cent gross written premium growth over 2014, largely driven by this strategy.

Partially offsetting these rating factors are the intense competition within Bahrain’s market and the elevated economic, political and financial system risks associated with operating there, which, when coupled with depressed oil prices, could impact growth opportunities for BNI.