We assigned our 'BBB' long-term counterparty credit and insurer financial strength ratings to Saudi Arabia-based Malath Cooperative Insurance & Reinsurance Co.
The ratings reflect strong current and prospective risk-based capital ratios, and strong overall capitalization.
The stable outlook reflects our expectation that despite premium growth above 30% per annum into the medium term, a lack of critical mass in terms of premium income will adversely affect earnings at least until 2012.
LONDON, June 24, 2009--Standard & Poor's Ratings Services said today that it assigned its 'BBB' long-term counterparty credit and insurer financial strength ratings to Saudi Arabia-based Malath Cooperative Insurance & Reinsurance Co. (Malath). The outlook is stable.
"The ratings on Malath reflect strong current and prospective risk-based capital ratios, and strong overall capitalization," said Standard & Poor's credit analyst David Anthony. "Malath also benefits from an experienced management team, from strong, cash-orientated investment strategies, and from strong liquidity," he added.
However, set against these positive factors are marginal current and near-term earnings prospects given inevitably high start-up and operating costs, and limited investment income, as well as still-increasing competition in the newly regulated and restructured insurance sector in the Kingdom of Saudi Arabia (KSA).
Malath is a 2007 start-up insurer in KSA and is listed on the Riyadh Tadawul stock exchange. It writes a composite, primary book of general non-life, group health, and some group life business in its domestic market, focusing principally on commercial and industrial risks, but also on retail motor.
"We expect that despite premium growth above 30% per annum into the medium term, a lack of critical mass in terms of premium income will adversely affect earnings at least until 2012," said Mr. Anthony. Malath will approach break-even results in 2009, with improving but still modest profitability in 2010 and 2011. Management may, however, accelerate medium-term development by opportunistically acquiring underperforming competitors. If an acquisition or merger is attempted, the company's core shareholder group is expected to be supportive with additional capital, with risk-based capitalization remaining strong under all circumstances.
Upward rating pressure will develop when prudent business growth brings Malath the status of an acknowledged leader in its principal target markets and, more particularly, when sound underwriting, conservative investments, and the economies of increasing scale help create a track-record of good, sustainable earnings. However, if capitalization is depleted by operating losses or by strategic activity, then the outlook could potentially be revised to negative.
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Standard & Poor's is the leading provider of financial market intelligence to customers in the Gulf's credit risk management, wealth management, and data and information markets. Since entering the region in the early 1990's, Standard & Poor's has become the largest provider of credit ratings in the G.C.C, rating 114 issuers. In equity markets, Shariah-compliant versions of Standard & Poor's global and regional equity market indices - S&P 500, S&P Europe 350, S&P Japan 500 and S&P/IFCI GCC - have created new opportunities for Islamic investors to benchmark their international investments and for asset managers to create new investment products serving the Islamic community. Standard & Poor's Fund Services launched a qualitative fund management rating service for regional asset managers in 2007. For further details on Standard & Poor's regional capabilities please visit www.gcc.standardandpoors.comPress Office Contacts:
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© Press Release 2009
