LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating (FSR) of B++ (Good) and the issuer credit rating (ICR) of “bbb+” for The Mediterranean & Gulf Insurance & Reinsurance Company (Medgulf) B.S.C. (c) (Medgulf Bahrain) (Bahrain), The Mediterranean and Gulf Cooperative Insurance and Reinsurance Company (A Saudi Joint Stock Company) (Medgulf KSA) (Saudi Arabia) and The Mediterranean & Gulf Insurance and Reinsurance Company S.A.L. (MEDGULF) (Medgulf Lebanon) (Lebanon). The outlook on the FSRs and ICRs for Medgulf Bahrain and Medgulf Lebanon all remain stable. The outlook on the ICR of Medgulf KSA remains negative, while the outlook on the FSR remains stable. Concurrently, A.M. Best has withdrawn the ratings in response to the group’s request to no longer participate in A.M. Best’s interactive rating process.
The ratings reflect the group’s strong business profile in its key markets and robust, albeit volatile, operating performance over the past five years. An offsetting rating factor is the group’s increasingly pressured level of risk-adjusted capitalisation. The ratings of Medgulf KSA and Medgulf Lebanon receive rating enhancement from Medgulf Bahrain, given their strategic importance to the group.
Medgulf Bahrain’s earnings have been volatile in recent years, reporting a robust pre-tax operating result of USD 41.1 million in 2014, compared with an operating loss of USD 62.5 million in 2013. During 2015, the group’s overall earnings have shown a material decline with a further operating loss expected for the year, following reserve strengthening and deterioration in technical performance at the group’s main operating entity, Medgulf KSA. In the first nine months of 2015, Medgulf Bahrain recorded a pre-tax operating loss of USD 38.1 million, compared with a profit of USD 29.2 million for the same period in 2014.
Over the past two years, Medgulf Bahrain and Medgulf KSA’s risk-adjusted capital position has trended downwards and become increasingly pressured. The deterioration principally reflects reserve strengthening recorded by Medgulf KSA in 2013 and again more recently in the first half of 2015. These actions have resulted in volatility in the company’s technical performance and ultimately weakened operating results over the past two years, which has somewhat limited internal capital generation.
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