LONDON–(BUSINESS WIRE)–AM Greatest has affirmed the Monetary Power Score of B- (Honest) and the Lengthy-Time period Issuer Credit score Score of “bb-” (Honest) of Arab Reinsurance Firm SAL (Arab Re) (Lebanon). The outlook of those Credit score Scores (scores) is unfavorable.
The scores replicate Arab Re’s steadiness sheet energy, which AM Greatest assesses as sturdy, in addition to its marginal working efficiency, impartial enterprise profile and marginal enterprise danger administration.
The unfavorable outlooks replicate ongoing nation danger pressures, which might result in a deterioration within the firm’s creditworthiness. The unfavorable outlooks additionally replicate pressures on Arab Re’s enterprise profile evaluation because of issues over its strategic positioning.
In AM Greatest’s view, financial, political and monetary system danger in Lebanon is extraordinarily elevated. Political uncertainty within the nation has continued to extend following the Might 2022 elections that failed to provide a parliamentary majority, and financial and monetary circumstances proceed to deteriorate, with the nation having to cope with hyperinflation and a considerably devalued forex. The weakening of the native banking sector has amplified capital circulation constraints within the economic system. Arab Re has vital publicity to Lebanon, the place the corporate is headquartered and has its sole operations, and holds a major a part of its investments (virtually half on the finish of 2021).
Arab Re’s steadiness sheet energy is underpinned by its risk-adjusted capitalisation, as measured by Greatest’s Capital Adequacy Ratio (BCAR), which was on the very sturdy degree at year-end 2021. Capital consumption within the firm’s BCAR stays pushed by funding danger, as Lebanese belongings appeal to vital capital prices to replicate heightened dangers stemming from the deteriorating political and financial scenario within the nation. The steadiness sheet energy evaluation additionally components within the firm’s skinny liquidity, evidenced by a ratio of liquid belongings to internet technical provisions of 114% on the finish of 2021, down from a excessive of 153% in 2016. Moreover, claims-paying means is constrained by capital controls imposed in Lebanon, which makes it troublesome for Arab Re to service overseas liabilities with belongings held in Lebanon.
Arab Re has a observe file of marginal working efficiency, with the corporate constantly reporting underwriting losses in all however one of many previous 9 years (2013-2021). Regardless of the long-term unfavorable observe file, Arab Re reported an underwriting revenue in 2021, with a 98% mixed ratio. Efficiency was supported traditionally by secure funding earnings primarily from curiosity yielding securities. Nonetheless, because the firm re-invested a fabric portion of its money and deposits right into a single fairness safety and non-yielding actual property in 2020, future funding earnings is predicted to be restricted and topic to potential volatility. Moreover, over 2019, 2020 and 2021, internet earnings was impacted by a cumulative USD 27.5 million of impairments referring to holdings of Lebanese Authorities bonds and deposits.
Arab Re has a distinct segment place in its core markets within the Center East and North Africa area, constructed upon its unique position as a reinsurer for Arab insurance coverage markets and longstanding relationships with cedants. Regardless of the corporate’s geographical scope, its progress potential is restricted, as reinsurance markets within the area stay extremely aggressive, while AM Greatest expects the Lebanese insurance coverage section to stay impacted by vital financial difficulties and political uncertainty.
This press launch pertains to Credit score Scores which were revealed on AM Greatest’s web site. For all score data referring to the discharge and pertinent disclosures, together with particulars of the workplace chargeable for issuing every of the person scores referenced on this launch, please see AM Greatest’s Current Score Exercise internet web page. For extra data relating to the use and limitations of Credit score Score opinions, please view Information to Greatest’s Credit score Scores. For data on the right use of Greatest’s Credit score Scores, Greatest’s Efficiency Assessments, Greatest’s Preliminary Credit score Assessments and AM Greatest press releases, please view Information to Correct Use of Greatest’s Scores & Assessments.
AM Greatest is a worldwide credit standing company, information writer and knowledge analytics supplier specialising within the insurance coverage business. Headquartered in the USA, the corporate does enterprise in over 100 nations with regional workplaces in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico Metropolis. For extra data, go to www.ambest.com.
Copyright © 2022 by A.M. Greatest Score Companies, Inc. and/or its associates. ALL RIGHTS RESERVED.