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ABNIC put on creditwatch negative

UAE insurer Al Buhaira National Insurance Company has been put on creditwatch negative by Standard & Poor’s.

The ratings agency said the financial profile of the insurer “has weakened”, therefore it is placing the firm’s BBB rating on creditwatch negative.
A statement from S&P said it is adjusting the ratings to reflect ABNIC’s, the parent company and core operating entity of ABNIC Group, weaker financial profile, pending further dialogue with the company. The statement added: “This, in turn, reflects our belief that ABNIC Group’s investments, liquidity, capitalisation, and financial flexibility have all weakened, primarily due to continued debt-funded property investment and rising leverage ratios.”
S&P said ABNIC Group has a consistently high-risk investment strategy, concentrated primarily on property – 70 per cent of total investments on March 31, 2010 – and secondarily on equities, including investment in affiliates, 13 per cent. According to the ratings agency, the group continues to make significant investments in property, so its relative exposure to this asset class is likely to rise.
However, S&P aims to resolve the creditwatch status on ABNIC within the next week, after meeting with the management of ABNIC Group and receiving more information.

The statement added: “We will discuss with management, in detail, the group’s forecast financial profile up to the end of 2012, especially its investment plans and returns, debt level and structure, and liquidity and cash flow profile.
“At this stage, were the ratings to be lowered, we do not anticipate lowering them by more than one notch. We could affirm the ratings if ABNIC can demonstrate a satisfactory plan to achieve the required credit metrics. We could lower the ratings by one notch if the group does not demonstrate a clear path toward restoring its credit metrics.”