Global Arab Network | Oman United Insurance Ratings Lowered To 'BBB-' On Weakening Business Profile

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Oman United Insurance Ratings Lowered To 'BBB-' On Weakening Business Profile

Global Arab Network - - John Short

Wednesday, 01 July 2009 16:55

Standard & Poor's Ratings Services said today that it lowered its long-term counterparty credit and insurer financial strength ratings on Oman United Insurance Co. S.A.O.G. (OUIC) to 'BBB-' from 'BBB'. The outlook is stable.

"The downgrade reflects our view that despite remaining Oman's second-largest insurer, OUIC's business profile has weakened as a result of a decline in its competitive position," said Standard & Poor's credit analyst Neil Gosrani.

This is due to attempts to substantially increase motor rates following the authorities' introduction of a unified motor policy in July 2008, and from more constrained distribution given the withdrawal from an existing agreement. In addition, the company has suffered some management instability in 2008 and new strategies need to be implemented. Weak operating performance, particularly from the motor book of business, has placed pressure on the company's current earnings and combined with weakness in the local equity market has put downward pressure on OUIC's risk-adjusted capital adequacy. In 2008, OUIC recorded about Omani rial (OMR)6 million of fair-value asset losses and impairments on investments, although shareholders' capital remains satisfactory at OMR15.5 million at March 31, 2009

"The stable outlook on OUIC reflects our view that capital adequacy and operating performance will gradually improve as the company brings greater selectivity and therefore greater stability to its underwriting performance," added Mr. Gosrani.

Although unlikely, an outlook revision to negative may result from a decline in capital adequacy, which may be due to continued underwriting underperformance or depressed equity markets. A positive ratings movement is unlikely during the outlook period and would require the rebuilding of a stable track record both in technical performance and in management and business strategies.

Global Arab Network

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