A.M. Best Affirms Ratings of ARABIA Insurance Company s.a.l.

  A.M. Best Affirms Ratings of ARABIA Insurance Company s.a.l.

Business Wire

LONDON -- March 28, 2014

A.M. Best has affirmed the financial strength rating of B++ (Good) and the
issuer credit rating of “bbb+” of ARABIA Insurance Company s.a.l. (AIC)
(Lebanon). The outlook for both ratings remains stable.

The ratings reflect AIC’s sound risk-adjusted capitalisation and
well-diversified business profile. Offsetting rating factors are the company’s
concentrated equity portfolio and the high level of economic and political
risk associated with operating in Lebanon.

AIC’s risk-adjusted capitalisation remains supportive of the current rating
level. Prospective risk-adjusted capitalisation is expected to be dependent on
future earnings retention, growth of AIC’s market profile and fluctuations in
the market value of its strategic affiliate, ARABIA Insurance Cooperative
Company (AICC).

In recent years, AIC has experienced robust operating performance across its
main markets. However, in 2013 the combined ratio rose above 100%, largely
resulting from underwriting losses in Lebanon. While AIC’s exposure to AICC is
limited to a 20% shareholding, there are concerns regarding its weak operating
performance and deteriorating financial position over the past two years.
Additionally, AIC may face a reputational risk should AICC’s position worsen.

AIC is headquartered in Lebanon, exposing its operations to heightened levels
of economic and political risk. This risk is partially offset by AIC’s
diversification in both revenue streams and investment holdings outside of
Lebanon.

Positive rating movement is unlikely at present. A reduction in risk-adjusted
capitalisation, deterioration in financial performance or an increase in
economic and political risks in AIC’s key markets would add negative pressure
to the ratings.

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.

This rating announcement has been issued by A.M. Best Europe – Rating Services
Limited, which 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 © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contact:

A.M. Best Company
Michael Dunckley, +(44) 20 7397 0321
Associate Financial Analyst
michael.dunckley@ambest.com
or
Mahesh Mistry, +(44) 20 7397 0325
Director, Analytics
mahesh.mistry@ambest.com
or
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, +(1) 908 439 2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com
 
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