4 July 2024News

AM Best puts BF&M ratings under review

Domestic insurer BF&M has had its credit rating placed under review following news of its planned merger with local rival Argus Group. 

Ratings agency AM Best has upgraded its under review status for Argus. 

AM Best said it had placed under review with developing implications the financial strength rating of A (Excellent) of the subsidiaries of BF&M. This included the ratings for   

BF&M's Cayman Islands subsidiary Island Heritage Insurance Company. 

The merger has also raised concerns in the Bermuda Parliament and from the Island's health regulator, the Bermuda Health Council over its ability to raise insurance premiums as the dominant provider on the island. 

AM Best said: "The ratings have been placed under review following BF&M’s and Argus Group Holdings' joint announcement on June 28, 2024, that the two companies have signed a definitive agreement in which BF&M and Argus Group will combine in an all-stock transaction. 

"Should this transaction close as announced, AM Best expects BF&M to maintain its current financial strength and operating performance as part of a combined BF&M-Argus Group entity and likely benefit from improved geographic and product diversification, as well as a more-favourable market position. It is currently presumed that the combined organisation would provide credit enhancement to the debt expected to be issued by Bermuda Life Insurance Company Limited, a subsidiary of Argus Group, to finance the purchase of BF&M shares from Camellia Plc. 

"This additional leverage is included in AM Best’s expectation of continued balance sheet strength."

The ratings will remain under review with developing implications pending regulatory approvals from the Bermuda Monetary Authority, which is expected in late 2024, AM Best said. 

AM Best revised the implications of the under review status to positive from developing for the Financial Strength Rating of A- of Argus Insurance Company and Bermuda Life Insurance Company,  both subsidiaries of Argus Group. 

It said prior to completion of the merger, Argus Group, though a subsidiary, intends to complete its acquisition of a 36.9% stake in BF&M from Camellia Plc in accord with a previous binding agreement. AM Best’s initial expectation is that the combined entity’s balance sheet strength assessment will be strongest — the assessed level currently given to Argus Group and BF&M individually — despite the issuance of debt to facilitate the acquisition of BF&M shares from Camellia.

In Bermuda's House of Assembly on Friday,  Premier David Burt urged MPs who had raised concerns about health insurance premium increases in the wake of the merger to support the Government's health reforms plans, The Royal Gazette reported. 

Burt said he believed the merger was carried out in response to plans for universal health coverage, adding: “In any place, when you see a reduction in competition. It is always the assumption that consumers will suffer and there’ll be an increase in costs.”

“It’s not for the Government to say how the private sector should work and operate. But it is for the Government to ensure that it is fair and not anti-competitive.”

A Ministry of Health statement outlined its key concerns and expectations regarding the merger, including:

• Assurances that the merger will not result in increased premiums for individuals and families

• The continuation of the full range of services

• The definitive support for the implementation of UHC in Bermuda

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