A.M. Best Affirms Ratings of Qatar General Insurance and Reinsurance Company S.A.Q.

LONDON--(BUSINESS WIRE)--A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B++ (Good) and issuer credit rating of "bbb+" of Qatar General Insurance and Reinsurance Company S.A.Q. (QGIR) (Qatar). The outlook for both ratings remains positive.

“Risk Management and the Rating Process for Insurance Companies”

The ratings reflect QGIR's strong level of risk-adjusted capitalisation, its good business position within the local market and its good track record of profitability. An offsetting factor continues to be the high concentration of real estate and equities within QGIR's investment portfolio.

A.M. Best believes that QGIR's prospective level of risk-adjusted capitalisation is strong and supportive of the company's business plans over the medium term. In A.M. Best's opinion, QGIR's risk profile is heavily weighted towards investment risks, which accounts for the majority of its risk-adjusted capital requirements as per Best’s Capital Adequacy Ratio (BCAR). At December 31, 2011, 83% of QGIR's total investment portfolio was invested in real estate and quoted equities, decreasing slightly from 86% at year-end 2010. A.M. Best anticipates the company will pursue reducing its real estate investments over the medium to long term, increasing diversification within its investment portfolio.

QGIR remains the second-largest insurer within the Qatari market with a 22% market share, despite a significant reduction in gross premium income from 2007, mainly as a result of a reshaping of its portfolio with a focus on non-energy business. A.M. Best considers that QGIR is likely to maintain its good local business position over the coming years given its strategy to increase its focus on non-energy lines. Furthermore, QGIR's Shari'a compliant subsidiary, General Takaful Company, recorded QAR 76 million gross written premiums in 2011 and is likely to contribute more significantly to QGIR's business profile in future years.

QGIR has maintained a good level of both underwriting and overall profitability in recent years. In 2011, the company reported an increased underwriting profit of QAR 34.8 million (USD 9.6 million), despite a slight increase of its combined ratio to 84.8% from 81.8% in 2010, and an increased net profit before tax of QAR 170.3 million (USD 46.8 million) that translated in return on equity of 6.6%, against 4.9% in 2010.

A.M. Best considers that QGIR's level of overall profitability is likely to remain exposed to potential volatility over the medium term given its high concentration in real estate and equity investments.

Upward rating movement could occur if QGIR were to actively diversify its investment portfolio whilst maintaining an adequate level of risk- adjusted capitalisation.

Downward rating movement could occur if the company’s risk-adjusted capitalisation were to deteriorate significantly to a level not supportive of its ratings.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilised include “Understanding Universal BCAR”; “Evaluating Country Risk”; “Risk Management and the Rating Process for Insurance Companies”; "Takaful (Shari'a Compliant) Insurance Companies"; and “Rating Members of Insurance Groups”. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.

A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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