Best’s News & Research Service - November 09, 2021 02:33 PM (EST)
AM Best Revises Outlooks to Negative for Al Ittihad Al Watani
- November 09, 2021 02:33 PM (EST)
London //BestWire// - AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of B+ (Good) and Long-Term Issuer Credit Rating of “bbb-” (Good) of Al Ittihad Al Watani (L’Union Nationale) Société Générale D’Assurances du Proche Orient, sal (Al Ittihad) (Lebanon).
These Credit Ratings (ratings) reflect Al Ittihad’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.
The revision of the outlooks to negative reflects pressure on Al Ittihad’s credit quality stemming from the impact of the deteriorating economic, political and financial conditions in Lebanon. Although the majority of its business is written in the United Arab Emirates, Al Ittihad is exposed to the heightened level of country risk associated with Lebanon as it is its country of domicile and a proportion of its assets are located in the country. In addition, its parent, Nasco Insurance Group Limited (NIG), has material exposure to Lebanon through various insurance and broking operations.
Al Ittihad’s balance sheet strength is underpinned by risk-adjusted capitalisation that is comfortably above the minimum level required for the strongest assessment, as measured by Best’s Capital Adequacy Ratio (BCAR), after adjustments made to reflect the heightened risks associated with its Lebanese assets (approximately a quarter of Al Ittihad’s investments expected at year-end 2020). The balance sheet strength assessment also factors in the company’s highly liquid and conservative investments held in the UAE, which constitute the majority of its investment portfolio.
Al Ittihad’s operating performance has improved significantly since 2017 as a result of management actions, including putting the company’s Lebanese portfolio into run-off and focusing on its profitable operations in the UAE. AM Best expects prospective operating performance to remain adequate over the underwriting cycle, supported by continued profitability in the UAE. However, the company is expected to report a significant loss for 2020 due to a monetary loss on balance sheet restatements associated with the application of IAS 29 - Financial Reporting in Hyperinflationary Economies.
Al Ittihad’s business profile assessment reflects its market position as a mid-tier player in the highly competitive UAE market, as well as its solid distribution capabilities, leveraging the brokerage network of its parent. Al Ittihad posted gross written premiums of LBP 95.8 billion (USD 63.2 million) in 2020 and has benefited from increased diversification by line of business since the transfer of established portfolios of NIG distributed business in the UAE to the company in 2017.
This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.