A.M. Best Places Ratings of ARABIA Insurance Cooperative Company Under Review with Negative Implications

  A.M. Best Places Ratings of ARABIA Insurance Cooperative Company Under
  Review with Negative Implications

Business Wire

LONDON -- March 28, 2013

A.M. Best Europe – Rating Services Limited has placed the financial strength
rating of B++ (Good) and the issuer credit rating of “bbb” of ARABIA Insurance
Cooperative Company (AICC) (Saudi Arabia) under review with negative
implications.

The rating action reflects a deterioration of AICC’s level of risk-adjusted
capitalisation following significant growth and an overall loss in 2012. The
company’s management has the second quarter of 2013 to update its business
plans and demonstrate how AICC’s level of risk-adjusted capitalisation will be
improved to a good level over the short and medium term. A.M. Best will review
the ratings before the end of July 2013.

Underwriting risks drive AICC’s level of risk-adjusted capitalization, and in
2012 the company increased its net written premium base by 42% to SAR 498
million. During the same period, the company incurred a net loss for the year,
and its capital and surplus decreased by SAR 7 million to SAR 167 million.
Since inception, AICC’s gross premium leverage (gross premiums written /
capital and surplus) increased from around 1.7 in 2009 to approaching 4 in
2012. It is this high level of business leverage that drives AICC’s level of
risk-adjusted capitalisation. A material reduction in net premium risk and
credit risk is expected in 2013; however, A.M. Best needs more time to
evaluate the impact of the reduction on the company’s prospective level of
risk-adjusted capitalisation.

A rating downgrade could occur if AICC’s level of risk-adjusted capitalisation
fails to improve to a good level over the short term.

The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides an extensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. Key criteria utilised include: “Rating Members of Insurance Groups”;
“Catastrophe Analysis in Best’s Ratings”; “Risk Management and the Rating
Process for Insurance Companies”; “Evaluating Country Risk”; and
“Understanding Universal BCAR”. Best’s Credit Rating Methodology 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. A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit
www.ambest.com.

       Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contact:

A.M. Best Company
Timothy Prince, +(44) 20 7397 0320
Senior Financial Analyst
timothy.prince@ambest.com
or
Rachelle Morrow, +1-908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Mahesh Mistry, +(44) 20 7397 0325
Director
mahesh.mistry@ambest.com
or
Jim Peavy, +1-908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com