IslamicFinance.de

Press Release

PARIS (Standard & Poor's) March 9, 2009--Standard & Poor's Ratings Services said today that it revised its outlook on Dubai-based insurer Dubai Islamic Insurance & Reinsurance Co. (Aman) to negative from stable. At the same time, we affirmed the 'BBB' long-term counterparty credit and insurer financial strength ratings on Aman.

"The outlook revision reflects the increasing pressure on Aman's risk-adjusted capital adequacy, arising mainly from the continuing decline in investment markets in the Gulf region," said Standard & Poor's credit analyst Lotfi Elbarhdadi.

Aman's investment strategy exacerbated this pressure, as the company concentrated its investments in the Dubai equity markets, particularly in stocks of financial institutions and real estate operators, which suffered sharp declines over the past four months. Moreover, Aman's gross premium income grew more than we had expected, by a substantial 66% (55% net of reinsurance). This has put further pressure on capital adequacy, as capital requirements have risen due to higher underwriting exposure, while adjusted capital has fallen. Meanwhile Aman has mitigated the capital needed to support its growing underwriting exposure by conservatively using reinsurance protection.

Positive rating factors include Aman's good competitive position, good technical earnings, and good financial flexibility. Based on the company's preliminary results for 2008, Aman continues to deliver sound growth and business diversification, and its underwriting results appear to have improved compared with those of the past two years, evidencing good quality underwriting. We still consider Aman's ability to access capital sources as good, due to its large retail shareholder base and the presence of supportive individual and institutional investors within the core shareholder base.

We could lower the ratings if capitalization does not recover during the next two years, if operating performance worsens, or if the company experiences long-term asset write-downs or losses. We could revise the outlook to stable during the same period if the company successfully restores its capital adequacy to good levels, while maintaining its good underwriting performance and prudent business mix.