Al Ittihad Al Watani (L’Union Nationale) gets a B+ from AM Best

AM Best has assigned a financial strength rating of B+ (Good) and an issuer credit rating of bbb- to Al Ittihad Al Watani (L'Union Nationale) Societe Generale d'Assurances du Proche Orient sal (Al Ittihad) (Lebanon). The outlook for both ratings is stable.

"The ratings of Al Ittihad reflect its improving capital position, robust underwriting performance and good business profile. Offsetting factors include its weak investment strategy and underdeveloped risk management framework," AM Best said.

Al Ittihad is a Lebanese-based insurer with branches in the United Arab Emirates and Kuwait, concentrating mainly on motor and medical business. AM Best said it expects Al Ittihad to continue to grow within its key markets, between 10-15 per cent in each of the next two years, with gross premiums written expected to be in excess of LBP 110 billion ($75 million).

In AM Best's opinion, Al Ittihad's capital position is supportive of the current ratings, given the lower asset risk following the disposal of significant private investments and full earnings retention. In AM Best's view, prospective risk-adjusted capitalisation is largely dependent on Al Ittihad's future investment strategy. It is important for Al Ittihad to adopt prudent investment management to ensure capital remains strong.

Additionally, Al Ittihad is supported by a solid reinsurance programme, with low catastrophe risk due to regional diversification. Furthermore, in AM Best's opinion Al Ittihad needs to strengthen its risk management framework to ensure risks are monitored and controlled effectively.

Al Ittihad's financial performance has been good, with pretax profits of $5 million in 2008, derived from robust underwriting performance. The company has experienced solid underwriting results for both life and non life business, with technical profits of $5.85 million in 2008. AM Best said it expects Al Ittihad's combined ratio to remain below 90 per cent over the next two years. Conversely, Al Ittihad's investment performance has been weak (with returns consistently below four per cent), given its historic concentration in private equity and real estate assets.