AM Best Removes From Under Review With Negative Implications and Affirms Credit Ratings of Saudi Arabian Insurance Company B.S.C. (c)

BY Business Wire | CORPORATE | 06/24/22 11:09 AM EDT

LONDON--(BUSINESS WIRE)-- AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of ?bbb-? (Good) of Saudi Arabian Insurance Company B.S.C. (c) (Damana) (Bahrain). The outlook assigned to these Credit Ratings (ratings) is negative.

The ratings reflect Damana?s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and marginal enterprise risk management (ERM).

The ratings were placed under review with negative implications on 15 November 2021, reflecting uncertainties around liquidity and risk-adjusted capitalisation, and the delayed release of the company?s audited financial statements for 2020.

The latest rating actions follow the conclusion of AM Best?s review of the steps taken by the company to resolve these uncertainties. These include the finalisation and release of the company?s 2020 audited financial statements in early 2022, and the partial liquidation of assets previously held in a group treasury account with Damana?s ultimate parent, Mawarid Holding Company.

Damana?s balance sheet strength assessment is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best?s Capital Adequacy Ratio (BCAR). The company?s capital requirements are driven largely by asset risk arising from the company?s concentrated investment portfolio that is weighted toward affiliated investments and the group treasury account. The group treasury account represented 56% of invested assets at year-end 2020. Following the settlement of the first tranche of group treasury assets in December 2021, this declined to 43% of invested assets at year-end 2021, while an additional settlement made in April 2022 has further reduced the weight of this investment. To date, the proceeds have been reinvested in cash and deposits.

Damana?s marginal operating performance assessment reflects the challenges faced by the company in generating sustainable positive technical and operating earnings. Over recent years, Damana has generated combined ratios in excess of 100% (as calculated by AM Best), reflective of considerable expense strain arising from its operating model.

Damana reported gross written premiums of BHD 17.7 million in 2020, a 12% increase compared with the previous year as the company executed strategic growth actions. Notwithstanding this, Damana experienced a slowdown in its top line over 2021, which is in part attributable to regulatory restrictions imposed by the Central Bank of Bahrain on the company?s operations in Bahrain in the second half of the year. This restriction was lifted in December 2021 and AM Best expects Damana to return to growth in 2022, however, acknowledges the challenging and competitive conditions in the company?s core markets of Bahrain, the United Arab Emirates, Oman and Kuwait.

The negative outlooks reflect the persisting challenges faced by Damana in the execution of its business plan and the ability to achieve consistent underwriting and operating profitability over the medium term. In addition, AM Best has ongoing concerns regarding the company?s capacity to manage investment and liquidity risk effectively.

This press release relates to Credit Ratings that have been published on AM Best?s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best?s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best?s Credit Ratings. For information on the proper use of Best?s Credit Ratings, Best?s Performance Assessments, Best?s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best?s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright ? 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Source: AM Best

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