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A.M. Best Revises Outlooks to Negative for GBG Insurance Limited

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A.M. Best has revised the outlooks to negative from stable and
affirmed the Financial Strength Rating of B++ (Good) and the Long-Term
Issuer Credit Rating of "bbb" of GBG Insurance Limited (Guernsey). GBG
Insurance Limited is a wholly owned subsidiary of GBGI Limited, its
non-operating holding company and consolidating unit for the GBG group
(GBG).

The ratings reflect GBG's strong balance sheet strength, strong
operating performance, limited business profile and marginal enterprise
risk management (ERM).

The outlooks have been revised to negative as GBG's risk-adjusted
capitalisation at year-end 2017 was at a lower level than anticipated
due to the impact of a one-off impairment allowance equivalent to a
quarter of the company's capital base. While the retention of future
earnings is expected to support improvement in GBG's risk-adjusted
capitalisation to the strongest level, as measured by Best's Capital
Adequacy Ratio (BCAR), A.M. Best is concerned that capital adequacy will
remain volatile.

GBG's balance sheet strength is underpinned by risk-adjusted
capitalisation at the very strong level, as measured by BCAR, and the
excellent quality of the company's investment portfolio. However, the
company's capital base is relatively small, which makes its
risk-adjusted capitalisation susceptible to fluctuations in its
financial results and underwriting exposures. Risk associated with the
company's high reliance on reinsurance is partially offset by the good
credit quality of its reinsurance panel.

GBG has a track record of producing strong operating results, as
demonstrated by its weighted average combined ratio of 89.2% and a
return on equity of 21.0%, reported between financial years 2014 and
2017. In 2017, the company's expense ratio rose to 43.0% (2016: 33.1%)
as a result of an impairment allowance that it reported in relation to
the restructure of its business in Angola, in response to adverse
economic conditions in the country. In the medium term, GBG is expected
to report positive operating results supported by its profitable
underwriting activities. Investment results are not material to the
company's earnings in view of its conservative asset allocation.

A.M. Best's assessment of GBG's business profile reflects its relatively
small size and concentration in the international health insurance
market segment. The company maintains good geographical diversification
but faces material competition from larger international players. GBG
has taken steps to enhance its ERM and corporate governance following
its public listing in 2017. Nonetheless, it has yet to demonstrate a
comprehensive risk framework that appropriately matches its high
operational risk profile, given its wide-spread operations.

This press release relates to Credit Ratings that have been published
on A.M. 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 A.M. Best's
Recent
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Understanding
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
Guide
for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating
Action Press Releases
.

A.M. Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit
www.ambest.com
for more information.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.

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