AM Best has placed the credit ratings of Bermudian-based BF&M Ltd and its subsidiaries under review with developing implications following the announcement of its proposed combination with the Argus Group in an all-stock transaction.

The ratings agency has placed under review with developing implications the financial strength rating of A (Excellent) and the long-term issuer credit ratings of “a” (Excellent) of BF&M Life Insurance Company Ltd, BF&M General Insurance Company Ltd and Island Heritage Insurance Company Ltd (Cayman Islands).

AM Best has also placed under review with developing implications the long-term ICR of “bbb” (Good) of the parent company, BF&M Ltd.

All companies are domiciled in Bermuda unless otherwise stated.

The credit 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.

The agency said: “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 Ltd, 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.”

Meanwhile, AM Best said it has revised the implications of the under-review status to positive from developing for the financial strength rating of A- (Excellent) and the long-term issuer credit ratings of “a-” (Excellent) of Argus Insurance Company Ltd and Bermuda Life Insurance Company Ltd. Both companies are subsidiaries of Argus Group Holdings Ltd.

Concurrently, AM Best has revised the under-review status to positive from developing for the long-term ICR of “bbb-” (Good) of Argus Group. All companies are domiciled in Bermuda.

The credit ratings reflect Argus Group’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

AM Best said: “Should this transaction close as announced, Argus Group likely would benefit from the combined financial strength and improved product and market diversification of the combined entity.

“Prior to completion of the merger, Argus Group, though a subsidiary, intends to complete its acquisition of a 36.9 per cent 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.

“The ratings will remain under review with positive implications pending regulatory approvals from the BMA and the purchase of BF&M shares by Argus Group. This is expected to occur late in the fourth quarter of 2024.”