LONDON, 2 April 2015

A.M. Best has downgraded the financial strength rating to A- (Excellent) from A (Excellent) and the issuer credit rating to "a-" from "a" of Abu Dhabi National Insurance Company PSC (ADNIC) (United Arab Emirates). The outlook for both ratings remains stable.

The rating action reflects deterioration of ADNIC's technical performance in 2014, which resulted in a material weakening of risk-adjusted capitalisation.

ADNIC reported a net loss of AED 280 million (USD 76 million) in 2014 against a profit of AED 156 million (USD 42 million) in 2013. The weak performance in 2014 resulted from ADNIC pursuing an aggressive underwriting strategy in the medical and motor lines of business, in order to maintain its leading market position at the expense of technical performance. Underwriting performance was affected by poor claims experience on the motor, medical and property lines of business, combined with reserve strengthening and one-off adjustments to ensure compliance with the new UAE insurance regulations issued in January 2015. Losses relating to underperforming business are expected to continue into the first half of 2015, but management anticipates that they will be able to return the company to profitability by year-end.

ADNIC's poor operating performance in 2014 was the main driver behind the reduction in its capital and surplus to AED 1,634 million (USD 445 million) from AED 2,115 million (USD 576 million) in 2013, and led to a significant decline in its risk-adjusted capitalisation. The company has recently restructured its operations, appointing a new CEO, and taken corrective measures such as reviewing underwriting guidelines, shedding loss-making business and improving risk selection to enhance technical earnings. Furthermore, ADNIC is following a strategy to de-risk its investment portfolio in 2015, which should alleviate pressure on its risk-adjusted capitalisation.

Upward rating movement is unlikely in the medium term. Downward rating actions could occur if management is unable to return the company to profitability in the medium term or if there is a further decline in its risk-adjusted capitalisation.

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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Catastrophe Analysis in A.M. Best Ratings

• Evaluating Country Risk

• Risk Management and the Rating Process for Insurance Companies

• Understanding Universal BCAR

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.

This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best's Ratings & Criteria Center.

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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