Beacon Insurance ratings reaffirmed but challenges threaten

Caribbean Information and Credit Rating Services Limited (CariCRIS) has warned that current economic challenges facing Barbados and other Eastern Caribbean states could impact Beacon Insurance Company Limited’s profitability and growth.

The ratings agency gave that caution even as it reaffirmed the insurance company’s assigned corporate credit ratings of CariA- (Foreign and Local Currency Ratings) on the regional rating scale and ttA- on the Trinidad and Tobago (T&T) national scale.

In a release on Friday, CariCRIS said “the ratings indicate that the level of creditworthiness of this obligor, adjudged in relation to other obligors in the Caribbean and within T&T is good”.

It reaffirmed the company’s financial strength rating of CariA- which indicates that its relative ability to meet its ongoing insurance obligations is good.

CariCRIS also revised the outlook on the ratings to stable from negative. The ratings agency said that was based on its expectation that Beacon would maintain stable earnings and profits over the next 12-15 months, driven by continued profitable operations supported by stable income.

“Additionally, Beacon is expected to remain adequately capitalized, with levels above regulatory requirements,” it added.

“Beacon’s ratings continue to reflect its good financial performance, driven by increases in premium income. Additionally, Beacon’s capitalization also remains healthy as evidenced by a capital adequacy ratio of 207 per cent as at March 2021, which has historically been supported by the company’s strong reinsurance programme.”

CariCRIS said further supporting the ratings was the company’s well diversified investment portfolio with satisfactory asset quality, adding that the rating strengths were “tempered by Beacon’s high reliance on insurance brokers, which may threaten the stability of its earnings”.

“Also, economic challenges currently faced in Barbados, Trinidad and Tobago and the Eastern Caribbean, precipitated by the COVID-19 pandemic may constrain profitability and growth,” it warned.

Beacon had sold 40 per cent of its shareholding to Colonial Group International Limited (CGI), now known as Coralisle Group Limited, a Bermuda-based insurance company with commercial operations in Barbados, Bermuda, the Cayman Islands, the Bahamas, the British Virgin Islands, and Turks & Caicos Islands.

CariCRIS said there were several factors that could individually or collectively lead to a lowering of the ratings and/or outlook, including a two-notch deterioration of the credit rating of Beacon’s top reinsurer or deterioration of the company’s capital adequacy ratio to 150 per cent or lower, on a sustained basis for at least six months under normal conditions.

It also pointed to factors it said could lead to an improvement in the ratings and/or outlook.

These include an improvement in market share of general insurance products in its largest market, Trinidad and Tobago, to 10 per cent or more; an improvement in the overall credit profile for Beacon’s fixed income portfolio where more than 60 per cent of the portfolio is rated investment grade on the S&P rating scale; an enhancement of Beacon’s risk management through the complete rollout of an enterprise risk management system; or increased profitability leading to an improvement in return on assets (ROA) and return on equity (ROE) to above 2.5 per cent and 10 per cent, respectively, for two consecutive financial periods.

Beacon is now owned by CGH Limited (46 per cent), CGI (40 per cent), and an individual shareholder (14 per cent). The company is domiciled in Trinidad and Tobago and has a regional presence through its Barbados, Grenada and St Lucia offices, and agency operations located in Dominica, St Kitts and Nevis, and St Vincent and the Grenadines.

It specializes in general insurance for individuals and business clients, offering a range of products including property, motor, accident and casualty, marine cargo and hull, bonds, and engineering insurance. (MM/PR)