Best’s News & Research Service - April 09, 2015 09:14 AM (EDT)
A.M. Best Affirms Ratings of Medgulf Bahrain and Key Subsidiaries
- April 09, 2015 09:14 AM (EDT)
London //BestWire// - A.M. Best has affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit rating (ICR) of "a-" of The Mediterranean & Gulf Insurance & Reinsurance Company (Medgulf) B.S.C. (c) (Bahrain) (Medgulf Bahrain) and The Mediterranean and Gulf Cooperative Insurance and Reinsurance Company (A Saudi Joint Stock Company) (Kingdom of Saudi Arabia) (Medgulf KSA). Concurrently, A.M. Best has affirmed the FSR of B++ (Good) and the ICR of "bbb+" of The Mediterranean & Gulf Insurance and Reinsurance Company S.A.L. (MEDGULF) (Lebanon) (Medgulf Lebanon). The outlook for all ratings remains stable.
The ratings reflect the group's strong business profile in its key markets, adequate risk-adjusted capitalisation and track record of robust operating performance.
Medgulf Bahrain has a strong regional franchise in the Middle East, with leading market positions in both Saudi Arabia and Lebanon. In 2014, gross written premiums (GWP) reached USD 1.4 billion. The group's main lines of business remain medical and motor, which account for approximately 65% and 15% of GWP, respectively. In 2014, over 80% of Medgulf Bahrain's premiums were generated from Saudi Arabia, where the group operates via Medgulf KSA as the third-largest domestic insurer. A further 10% of premium revenues emanated from the smaller Lebanese market, with Medgulf Lebanon ranked as the largest insurer in the country. The group also has operations in Bahrain, Jordan, Egypt and the United Kingdom.
Medgulf Bahrain's consolidated risk-adjusted capital position, although adversely impacted by reserve strengthening from Medgulf KSA in 2013, has improved to a more adequate level in 2014. Good retained earnings during 2014 resulted in group shareholders' equity (including minority interests) increasing to USD 595.7 million, up from USD 563.6 million in 2013. Prospective risk-adjusted capitalisation is anticipated to improve over the next three years, supported by strong retained earnings and controlled underwriting growth. Medgulf Bahrain has good financial flexibility and currently has no debt obligations.
Medgulf Bahrain reported a robust pre-tax operating result of USD 41.1 million in 2014, compared with a loss of USD 62.5 million in 2013. Earnings remain largely tied to the underwriting performance of its Saudi subsidiary. Accordingly, Medgulf Bahrain's operating loss in 2013 was chiefly driven by Medgulf KSA, which was impacted by market-wide regulatory changes in Saudi Arabia, resulting in reserve strengthening and technical losses. Medgulf Bahrain's underwriting performance returned to a profitable position in 2014, evidenced by a combined ratio of 98%. Going forward, the group's underwriting performance is expected to track more closely with its five-year average combined ratio of 95% (2010-2014).
Positive rating actions for Medgulf Bahrain may arise if good operating performance persists over the medium-term and if risk-adjusted capitalisation were to improve markedly. Negative rating actions could occur if there is a notable deterioration in Medgulf Bahrain's operating performance or if its risk-adjusted capitalisation decreases to a level not supportive with the current ratings.
The ratings of Medgulf KSA and Medgulf Lebanon benefit from rating enhancement from Medgulf Bahrain, reflecting their strategic importance to the group. Positive or negative rating actions on these subsidiaries could arise from a change in their stand-alone fundamentals, their strategic importance to the parent or from a change to Medgulf Bahrain's 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.
Key insurance criteria reports utilised:
- Catastrophe Analysis in A.M. Best Ratings
- Evaluating Country Risk
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
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 press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center .
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