A.M. Best Downgrades Ratings of Arabia Insurance Cooperative Company

  A.M. Best Downgrades Ratings of Arabia Insurance Cooperative Company

Business Wire

LONDON -- August 1, 2013

A.M. Best Europe – Rating Services Limited has downgraded the financial
strength rating to B- (Fair) from B++ (Good) and the issuer credit rating to
“bb-” from “bbb” of Arabia Insurance Cooperative Company (AICC) (Saudi
Arabia). Both ratings have been removed from under review with negative
implications and assigned a negative outlook.

The rating downgrades reflect the significant deterioration in AICC’s
risk-adjusted capitalisation during the first half of 2013, following large
underwriting losses and the cancellation of a substantial reinsurance
contract. In the second quarter of 2013, AICC reported an overall loss of SAR
43.5 million (USD 11.6 million), equal to 26% of its reported capital and
surplus as at year-end 2012. Additionally, AICC cancelled a proportional
reinsurance contract mid-year, which was expected to provide material capital
relief and partially offset its high level of underwriting leverage. Given the
scale of AICC’s losses in the first half of 2013, it is unlikely that
underwriting profits alone will be sufficient to replenish its capital in the
short term, and the company may need to seek alternative options in order to
alleviate capital pressures. Moreover, the deterioration in AICC’s
risk-adjusted capitalisation raises significant concerns over its risk
management practices.

The assigned negative outlook reflects A.M. Best’s uncertainty over AICC’s
prospective risk-adjusted capitalisation. If the company is unable to
demonstrate that its risk-adjusted capitalisation will be maintained at a fair
level over the medium term, the ratings are likely to be further downgraded.
Upward rating pressure could arise if AICC is able to materially improve its
risk-adjusted capitalisation.

The methodology used in determining these ratings is Best’s Credit Rating
Methodology, which provides a comprehensive explanation of A.M. Best’s rating
process and contains the different rating criteria employed in the rating
process. 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
Tim Prince
Senior Financial Analyst
+(44) 20 7626 0320
timothy.prince@ambest.com
or
Mahesh Mistry
Director
+(44) 20 7626 0325
mahesh.mistry@ambest.com
or
Rachelle Morrow
Senior Manager, Public Relations
+(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
+(1) 908 439 2200, ext. 5644
james.peavy@ambest.com
 
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