Ratings Roundup: Arab Union, GBG

March 10, 2011

A.M. Best Europe – Rating Services Limited has placed under review with negative implications the financial strength rating of ‘B’ (Fair) and issuer credit rating of “bb+” of Syria’s Arab Union Reinsurance Company (AURe). Best explained that the rating action “reflects the impact of the recent political unrest in the region on AURe’s operations. There are concerns regarding the sustainability of AURe’s business profile, with approximately 25 percent of its business written sourced from affected areas. Additionally, AURe has exposure to Libya through its branch operation, where the company receives 10 percent legal cessions. Moreover, the Libyan government owns 50 percent of AURe and has representation on its board, which may give rise to uncertainty in AURe’s prospective viability.” Best added that at present it is “not in a position to determine the long-term effect that this will have on the company’s operations and liquidity. The under review status will be resolved once there is further clarity regarding the political situation in the region and any impact on AURe.”

A.M. Best Europe – Rating Services Limited has assigned a financial strength rating (FSR) of ‘B+’ (Good) and issuer credit rating (ICR) of “bbb-” to Guernsey-based GBG Insurance Limited, both with stable outlooks. The ratings of GBG “reflect the company’s adequate level of prospective risk-adjusted capitalization, good anticipated financial performance and modest business profile,” said Best. However, as an offsetting factor, Best cited the “relatively high level of debt within its ultimate parent, Saxon Lane.” Best said it considers that GBG’s capital base of $11.4 million is “supported by a conservative investment profile and a reinsurance panel of excellent credit quality.” Best also indicated it anticipates that with the “full retention of profits over the medium term, GBG’s capital base is likely to grow relatively rapidly and keep pace with the expected increases in adjusted capital requirements. A low level of premium retention combined with GBG’s track record as a profitable brokerage supports A.M. Best’s anticipation of a good level of profitability over both the short and medium term, with underwriting results driving overall profits.” Best expects GBG to report underwriting profits in the region of $3.5 million in 2011 from a premium income of approximately $40 million. “Although operating within a relatively fragmented niche market of expatriate health and life insurance, A.M. Best considers that GBG is small compared to many of its more diversified peers and is likely to face significant competition as it attempts to grow its book of commercial business. Supporting GBG’s business profile is a strategic alliance with Chubb that allows for both marketing and technical support over the term of the company’s business plans. Although GBG does not have any debt, its ultimate holding company, Saxon Lane, remains relatively highly leveraged. At June 30, 2011, A.M. Best anticipates that Saxon Lane will hold senior debt of USD 5.5 million, shareholders’ funds of around $9 million and goodwill of $4.2 million.

Was this article valuable?

Here are more articles you may enjoy.