A top rating agency has downgraded the Family Guardian Insurance Company.
A.M. Best Company made the determination yesterday, revising the BISX-listed firm's financial strength rating from "A-" to "B++", or from excellent to good. Its issuer credit rating also took a hit, falling from "a-" to "bbb+".
However, the rating agency has now classified the overall outlook from negative to stable.
The move, according to the rating agency, reflects Family Guardian's "high concentration in mortgage loans relative to its total equity and the continued delinquencies in its mortgage loan portfolio, which are attributable to the current weak economic
environment in The Bahamas".
A.M Best also noted some improvements at the firm, such as a decline in mortgage loans as a percentage of total investment assets as well as a percentage of total capital.
Indeed, according to Famguard Corporation Limited's first quarter results, the parent company recorded a 54.4 percent net income increase. Famguard was aided by a 7.9 percent dip in total policyholder benefits paid out, the report noted. Gross policyholder benefits dropped by 18.6 percent to $15.508 million, from $19.057 million the previous year.
Total benefits and expenses declined $26.751 million to $25.661 million year-on-year.
The rating agency also acknowledged a trend of improving results in Family Guardian's group health division. The firm has recorded growth in premium income, and over the past five years achieved an annual rate of premium growth of 13 percent.
"A.M. Best also notes that the company trends favorably when it comes to profitability and capital with consistent growth in stockholders' equity, despite dividend payments. Family Guardian's three core business segments - home service, financial services and group division led by BahamaHealth - provide business diversification and competitive advantages in a generally limited and mature marketplace," according to the rating agency.
Nevertheless, it is felt the overall performance poses a challenge to the longer-term financial results and growth opportunities.
Increased delinquency rates in the mortgage loan portfolio, adverse operating profitability and an overall deterioration of the Bahamian economic environment were cited as key factors that could result in negative rating actions for Family Guardian.
Famguard is now focused on its alliance with Aetna, a third party healthcare provider, for 2012 and 2013. The alliance is intended to boost the services for policyholders both domestically and abroad.
A.M. Best assigned an issuer credit rating of "bb+" to Famguard, with a stable outlook.

Click here to read more at The Nassau Guardian