A.M Best Downgrades Issuer Credit Rating of National Life & General Insurance Company SAOC (Oman)

A.M. Best Co. has downgraded the issuer credit rating (ICR) to “bbb” from “bbb+” and affirmed the financial strength rating of B++ (Good) of National Life & General Insurance Company SAOC (NLGIC) (Oman). The outlook for both ratings remains negative.

The rating action reflects NLGIC’s deteriorating technical performance stemming from expansion into motor and medical risks and its weak enterprise risk management. Offsetting factors are the company’s strong capital position and good performance on its core life portfolio.

In A.M. Best’s opinion, NLGIC’s expansion into motor and medical business lines has worsened underwriting performance and changed its business profile from an established life insurer to a vulnerable composite insurer. A.M. Best believes NLGIC’s management has been ineffective at writing motor and medical risks, resulting in combined ratios above 100%, with losses between OMR 1.5 and OMR 2 million in each of the last two years. This has more than offset any profit produced on its core life portfolio, with the company reliant on investment income to generate positive returns. Furthermore, in 2009, motor and medical risks accounted for approximately 50% of gross premiums, and the expectant concentration of these risks in NLGIC’s portfolio is likely to place further pressure on technical profitability.

Moreover, NLGIC has been unable to demonstrate sufficient improvements in its risk management capabilities. The lack of company level controls is a major concern, particularly with regards to investment risk management and capital strategy. Any further deterioration in performance or insufficient improvements in risk mitigation is likely to place further downward pressure on the ratings.

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at http://www.ambest.com/ratings/methodology.