LONDON: Rating agency AM Best has maintained the under review with negative implications status for the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Al Ittihad Al Watani (L’Union Nationale) Société Générale D’Assurances du Proche Orient, sal (Al Ittihad) (Lebanon).
These Credit Ratings (ratings) reflect the company’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.
Al Ittihad’s balance sheet strength is underpinned by its strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). The balance sheet strength assessment also factors in the company’s highly liquid and conservative investments, most of which are held in the United Arab Emirates (UAE).
Al Ittihad’s operating performance has improved since 2017 as a result of actions implemented by management. These included putting the Lebanese portfolio into run-off and focusing on the company’s profitable operations in the UAE. AM Best expects prospective performance to be adequate over the underwriting cycle, supported by continued profitability in the UAE and the successful management of run-off portfolios.
Al Ittihad is strategically important to its parent, Nasco Ultimate Holding Limited, as an underwriting platform in the UAE, and receives technical support from its sister company, Bankers Assurance S.A.L. (Bankers). Capital extraction from Al Ittihad by its shareholders to a level that would weaken its balance sheet is considered unlikely, and no drag is assigned to the ratings, despite Bankers’ weaker credit profile.
These ratings remain under review with negative implications due to the weakening of the economic and financial conditions in Lebanon and the country’s recent default. Although the majority of its business and assets are in the UAE, Al Ittihad maintains some exposure to Lebanon, where it is domiciled and where it holds approximately 30% of its assets (mainly real estate and some cash and deposits).
AM Best will closely monitor events in Lebanon, and aim to resolve the under-review status once there is more clarity as to their impact on Al Ittihad’s credit profile.