A.M. Best Affirms Ratings of Al Ittihad Al Watani (L’Union Nationale) Societe Generale d’Assurances du Proche Orient sal

LONDON--(BUSINESS WIRE)-- A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of Al Ittihad Al Watani (L'Union Nationale) Societe Generale d'Assurances du Proche Orient sal (Al Ittihad) (Lebanon). The outlook for both ratings has been revised to positive from stable.

The ratings of Al Ittihad reflect its improved risk-adjusted capitalisation and good underwriting performance. The outlook has been revised to positive following the improvement of the company’s asset risk profile in 2009. Offsetting factors include its weak investment strategy, modest business profile, and embryonic risk management framework.

Al Ittihad is a Lebanese-based insurer with branches in the United Arab Emirates and Kuwait, concentrating mainly on motor and medical business. Most of the business written by the company is originated in UAE and in Kuwait (respectively 65 and 18% of the premiums generated in 2009), where high competition is expected to maintain pressure on Al Ittihad’s margins in the future.

However, in A.M. Best's opinion, Al Ittihad's capital position is supportive of the current ratings, given the lower asset risk following the disposal in 2009 of significant private investments. In A.M. Best's view, prospective risk-adjusted capitalisation is largely dependent on Al Ittihad's future investment strategy. It is critical for Al Ittihad to implement a conservative investment management to ensure capital remains strong. Additionally, Al Ittihad’s capital position is supported by the management’s decision to continue to have full earnings retention over the next few years, and by a strong reinsurance programme, with over 80% of reinsured risks placed with highly rated companies.

Al Ittihad's financial performance has been good, though its pretax profits decreased to LBP 0.7 billion in 2009 from LBP 7.4 billion in 2008, mainly driven by its underwriting performance. Al Ittihad remained technically profitable in 2009 for both non-life and life business, despite an increase of the non-life combined ratio to approximately 94% up from 86% in 2008, principally due to a charge of LBP 3.9 billion attributable to outstanding claims relating to compulsory expatriate medical business in Kuwait. The provision for outstanding claims related to Kuwaiti medical business is expected to increase further in the next two years, which, combined with the competitive environment, is expected to weigh on the company’s loss ratio, which A.M. Best expects to be in the region of 60 – 65%.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies”; and “Understanding BCAR for Property/Casualty Insurers”. Methodologies 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.Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best
Ghislain Le Cam, +(44) 20 7626 6264
Financial Analyst
ghislain.lecam@ambest.com
or
Carlos Wong Fupuy, +(44) 20 7626 6264
Assistant General Manager
carlos.wong-fupuy@ambest.com
or
Rachelle Morrow, +1-908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy
Assistant Vice President, Public Relations
+1-908-439-2200, ext. 5644
james.peavy@ambest.com

Source: A.M. Best Company, Inc.