|03 July, 2019

A3 IFSR ratings affirmed for Saudi-based Walaa

The rating action follows the signing of a non-binding MoU with Metlife AIG ANB Insurance Company (Metlife AIG ANB) to evaluate a potential merger between the two companies.

Moody's has affirmed its A3 insurance financial strength rating (IFSR) of Saudi Arabia’s Walaa Cooperative Insurance Company (Walaa), changing the outlook to negative from stable.

In a statement, Moody’s said that the change in outlook to negative from stable reflects the short-term downside risks that the merger poses to Walaa's underwriting profitability, given the loss-making history of Metlife AIG ANB.

Moody’s stated that to readdress this business to return to profitability, the merged entity should also resolve various deficiencies raised by the regulator, particularly concerning Metlife AIG ANB's internal controls and risk management of the company.

Walaa is expected to potentially benefit from the merger in the long term if the tie-up is executed successfully, through the diversification of its line of business into protection and savings.

The affirmation of Walaa's A3 IFSR reflects the company’s strong market position and brand—with a 3.1 per cent market share in terms of gross premium written in 2018, strong asset quality, driven by a conservative investment strategy as well as strong capital adequacy level and good reserve adequacy with the sophistication of setting and monitoring underpinned by in-house actuaries.

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