AM Best Affirms Credit Ratings of Arabia Insurance Company s.a.l.

LONDON--(BUSINESS WIRE)-- AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of ?bbb-? (Good) of Arabia Insurance Company s.a.l. (AIC) (Lebanon). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect AIC?s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

AIC?s balance sheet strength is underpinned by its consolidated risk-adjusted capitalisation, which was at the strongest level at year-end 2023, as measured by Best?s Capital Adequacy Ratio (BCAR). The company?s capital consumption is largely driven by investment risk, reflecting the group?s exposure to equity and real estate investments, with certain holdings attracting additional concentration charges in the BCAR model. The assessment factors in the geographically diversified operations of AIC across the Middle East, which partially shields the group from the very high political, economic and financial system risks in Lebanon. AM Best expects AIC?s rating fundamentals to remain resilient amid the challenging operating conditions in Lebanon. Capital fungibility is constrained by the increasing regulatory capital requirements in AIC?s operating jurisdictions, which remains a partially offsetting factor.

AIC has a track record of adequate operating performance, with positive results generated in four of the past five years (2019-2023). The group generated a good return-on-equity (ROE) ratio of 5.4% in 2023, benefitting from improved investment income in light of the favourable interest rate environment. Nonetheless, overall earnings have been volatile, having been negatively impacted by the challenging operating conditions prevailing in AIC?s domestic market, particularly in 2020 when AIC reported an ROE of -6.4%. AM Best expects prospective performance to be supported by actions taken by management to rationalise the underwriting portfolio, though AIC?s exposure to weather-related events in the first half of 2024 is expected to weigh on its profitability.

AIC?s market profile benefits from a long-standing reputation and diversification of operations across the Middle East. However, the group?s modest footprint across most of its core markets limits its competitive position.

AM Best considers political and regulatory risks to be among AIC?s greatest challenges. The appropriate ERM assessment takes into consideration AM Best?s expectation that AIC will continue to proactively develop its risk management framework and capabilities to adapt to the evolving nature of its operating markets in a controlled way.

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.

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Source: AM Best