AM Best Affirms Credit Ratings of BF&M Limited and Its Subsidiaries

AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "a" (Excellent) of BF&M Life Insurance Company Limited, BF&M General Insurance Company Limited and Island Heritage Insurance Company, Ltd. (Island Heritage) (Cayman Islands). AM Best also has affirmed the Long-Term ICR of "bbb" (Good) of the parent company, BF&M Limited (BF&M). All companies are domiciled in Hamilton, Bermuda, unless otherwise stated. The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect BF&M's balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

BF&M's ratings and outlooks are supported by its strongest balance sheet strength assessment, driven by its strongest level of risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR). BF&M has historically grown capital and surplus to maintain more-than-sufficient capitalization to support its underwriting and investment risks. BF&M mitigates volatility in capitalization levels with significant catastrophe reinsurance protection. This protection continues to be prioritized despite a hardening reinsurance market.

BF&M has a history of profitable operating results. In years when underwriting results were down, investment income was able to provide an offset. BF&M's financial results in 2021 remained favorable and primarily driven by improvements in its life and property lines, the former of which was the result of lower COVID-19-related mortality. The company also has a significant pension management business that provided additional fee income in the period. Growth in this business was strong in 2021 due to favorable capital market conditions, but has been negligible over the past few years. The company's business profile is reflective of the solid market share it garners in its domestic market of Bermuda and geographic diversification of business throughout the Caribbean through its Island Heritage subsidiary, where it adds primarily property/casualty (P/C) premium. BF&M is focused on profitable growth, and in 2020, divested its majority ownership of Insurance Corporation of Barbados Ltd (ICBL), as ICBL's financial results were not meeting BF&M's expectations.

Premium growth from BF&M's health line of business has been stagnant since the local government moved to fund its largest health provider and its authority, the Bermuda Hospital Board, with a block grant annually in 2019. This was considered phase one in what was expected to be a lengthy process toward a national plan, which has been delayed due to COVID-19 and general uncertainty of the longevity of the pandemic. AM Best will continue to monitor the developments of the Ministry of Health's future market reform plans and how BF&M adapts to them.

BF&M's significant catastrophe reinsurance protection and overall risk management philosophy are central to the organization's efforts to retain appropriate amounts of risk and mitigate adverse financial impacts to the group. Minimal Cat activity in BF&M's jurisdiction drove little impact to the P/C operations from catastrophe losses. Risk appetite continues to be conservative, and responsible underwriting is put before premium growth. When combined with the extensive reinsurance program, the company has managed to navigate multiple adverse market events such as hurricanes and the recent COVID-19 pandemic. Lingering effects from the pandemic continue to impact the operating environment, though social and economic restrictions have largely been removed, resulting in economic tailwinds for the region in 2021.

In addition, AM Best continues to monitor the status of the strategic review announced by the company on June 29, 2022. AM Best continues to expect BF&M to continue in its normal course of business operations until the completion of the review. Upon completion of the strategic review and any associated announcement, AM Best will evaluate the potential impact to BF&M's rating fundamentals.

This press release relates to Credit Ratings that have been published on AM 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 AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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