S&P Revises B.E.S.T. Re Outlook to Positive; Affirms ‘BBB’ Ratings

December 20, 2006

Standard & Poor’s Ratings Services has revised its outlook to positive from stable on Tunisia-based reinsurer B.E.S.T. Reinsurance Co. (Best Re). S&P also affirmed the Company’s ‘BBB’ long-term counterparty credit and insurer financial strength ratings.

“The outlook revision reflects Best Re’s proven ability to maintain strong earnings through the cycle, and enhanced capitalization and financial flexibility resulting from a new shareholding structure,” stated S&P credit analyst Lotfi Elbarhdadi.

S&P said: “The ratings reflect Best Re’s strong operating performance, strong capital adequacy, and good competitive position. Offsetting these is the reinsurer’s exposure to highly volatile emerging markets, high reliance on retrocession capacities, and restricted investment strategy.

“Best Re is a modest property/casualty reinsurer with $108 million in gross premiums written (GPW) in 2005, focusing on emerging markets–particularly Southeast Asia, Turkey, North Africa, and the Middle East–and assuming short-tail lines, primarily fire, marine, and engineering. Best Re is 100 percent owned by Salama Islamic Arab Insurance Co. (not rated), a financial group based in the United Arab Emirates.”

“We expect Best Re to continue to post increases in operating performance and maintain its reported combined ratio steadily below 95 percent, helped by careful, risk-management-oriented selection of new markets and businesses,” Elbarhdadi observed.

Meanwhile, the reinsurer’s business and risk profile and strong shareholder support are to remain unchanged. We also expect Best Re to further strengthen enterprise risk management, introduce risk-adjusted targets for its growth strategy, and enhance asset-liability management as well as operational risk control practices.

“Meeting such expectations could result in an upgrade. Conversely, we could revise the outlook back to stable if capital adequacy falls due to growth, operating performance deteriorates compared with historical levels, or Best Re raises its risk profile or loses sizable market share due to adverse market conditions,” the bulletin concluded.

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