A.M. Best affirms credit ratings of Trust Re to A-, stable outlook

A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of "a-" of Trust International Insurance & Reinsurance Company B.S.C. (c) Trust Re (Bahrain). The outlook of these ratings remains stable.

Trust Re is ultimately owned by Nest Investments (Holdings) Limited (NEST), an investment holding company operating in the financial services and real estate sectors.

The rating affirmations reflect Trust Re's strong risk-adjusted capitalisation, track record of solid operating performance and good business profile.

Trust Re actively manages its solvency position to make sure it remains at a strong level. In 2016, the company's risk-adjusted capitalisation was strengthened by a cash injection of USD 20 million, which increased shareholders' equity by 6.4% to USD 457 million. A.M. Best anticipates Trust Re's risk-adjusted capitalisation to remain supportive of the ratings, as further parental contributions and internal capital generation are expected to support prospective underwriting growth.

Trust Re has a track record of consistent profitability, with a five-year (2012-2016) weighted average return on equity of 5.6%. In 2016, the company reported a profit of USD 19 million, down from USD 31 million reported in 2015, when the company had benefited from a one-off realised gain on investments of USD 18 million. Disciplined risk selection and a prudent reserving policy have enabled Trust Re to maintain robust technical results, evidenced by a five-year (2012-2016) average combined ratio of 96.5%, and the ability to absorb large losses whilst maintaining technical profitability. In the first half of 2017, Trust Re's underwriting performance is proving resilient, with the company expecting to report a technical profit despite incurring two large market losses in its facultative energy portfolio. Although investment returns remain relatively low, they continue to account for a significant proportion of overall earnings. The company's performance for the first half of 2017 is expected to be in line with prior-year performance.

Trust Re has a developing business profile as a specialist underwriter of energy and property reinsurance across the Middle East, Afro-Asian and Eastern European markets, underpinned by its long-standing relationships with key cedants. In addition, the company benefits from its exposure to the Lloyd's market via its investment in Trust Underwriting Limited, a corporate member at Lloyd's. In December 2016, Trust Re obtained control of Oman Reinsurance Company SAOC (Oman Re), and started to consolidate it as a subsidiary. Oman Re forms part of Trust Re's strategy to diversify the company's portfolio by targeting niche small to medium risks across India and the Central Eastern European markets. However, given the modest scale of Oman Re, A.M. Best does not expect the composition of Trust Re's underwriting portfolio to change materially in the short term.

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