LONDON, Thursday, December 23rd 2010 [ME NewsWire]:
(BUSINESS WIRE)-- A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of “bbb+” of Arab Insurance Group (B.S.C.) (ARIG) (Bahrain). The outlook for both ratings is stable.
The ratings of ARIG reflect the company’s solid business position in the Middle East regional reinsurance market, the strong risk-adjusted capitalisation and strengthening risk management, as well as the improving technical performance. An offsetting factor is related to the potential downward pressure on the prospective level of capitalisation following the growth plans in the international business.
In A.M. Best’s opinion, ARIG maintains a strong business profile in the Middle East, where it is recognized as a prominent regional reinsurer, while it is increasing its international book of business.
Moreover, A.M. Best believes that ARIG's risk-adjusted capitalisation (as per A.M. Best’s proprietary model) is strong and supportive of the company’s business in the next couple of years, as it has been improving in 2009 and 2010 after the decline reported in 2008, consequent to the crisis of the financial markets. In A.M. Best’s opinion, ARIG keeps enhancing its risk management framework, the processes and analyses of which are validated by independent third parties.
In recent years, ARIG has been constantly focusing on the quality improvement of its reinsurance business portfolio, which resulted in a steady reduction of its combined ratio to below 100%, although the technical result remains on the borderline break-even level.
Considering the limited opportunities for organic growth of business within the Middle East region, ARIG is targeting to expand internationally, both directly, through a stronger focus on Northern Africa and the Far East, and indirectly, through the partnership with the international reinsurer group Hardy.
In particular, A.M. Best sees positively the strengthening relationship with the Hardy group. Namely, ARIG already writes a quota share in Hardy’s international book of business and, starting in 2011, will provide 7.5% of capacity to Hardy-managed syndicate 382 at Lloyd’s. In addition, in 2009 the two companies launched a 50/50 joint venture - Hardy Arig Insurance Management – which operates as a coverholder for Hardy’s syndicate 382.
A.M. Best believes that these opportunities allow ARIG to increase its geographical and product diversification as well as to participate in a book of business with a track-record of good technical profitability. At the same time the embedded volume growth associated with these initiatives could put downward pressure on the company’s level of risk-adjusted capitalisation beyond a time horizon of two to three years.
The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR - A.M. Best's Capital Adequacy Ratio for Insurers” and “Assessing Country Risk”. Methodologies can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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A.M. Best
Lelio Lapresa, +(44) 20 7626 6264
Senior Financial Analyst
lelio.lapresa@ambest.com
Carlos Wong-Fupuy, +(44) 20 7626 6264
Assistant General Manager
carlos.wong.fupuy@ambest.com
Rachelle Morrow, +1-908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
Jim Peavy, +1-908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com
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