Best Upgrades, Affirms B.E.S.T. Re Ratings

March 12, 2007

A.M. Best Co. has upgraded the issuer credit rating to “bbb+” from “bbb” and has affirmed the financial strength rating of B++ (Good) of Tunisia’s B.E.S.T. Reinsurance with a stable outlook. .

“The ratings of BEST Re reflect the rating enhancement the company receives from its new ultimate parent company, SALAMA Islamic Arab Insurance Co. (P.S.C.) (SALAMA),” said Best (See related article). “The ratings also factor the company’s good business position, its profitable underwriting performance and improving risk-adjusted capitalization.”

Best said it “believes that BEST Re is of strategic importance to its new ultimate parent, SALAMA, as it represents approximately 75 percent of the consolidated gross premiums written. In addition, SALAMA recently enhanced BEST Re’s capital base in line with the group’s growth strategy.”

The company “has a good business profile in the emerging markets in which it operates (North Africa, Middle East and Southeast Asia) and forecasts gross premiums to have grown strongly by approximately 20 percent to $130 million in 2006 mainly due to higher demand in the primary markets,” Best noted.

However, Best indicated that “BEST Re remains a follower on most treaties with limited influence on pricing and on terms and conditions. Prospectively, the company is likely to benefit from its links to SALAMA (which is a major Takaful and Retakaful provider) to grow its market share of Shari’ah compliant products where demand is high.”

Best also pointed out that “BEST Re’s risk-adjusted capitalization improved to a strong level in 2006 following the $45 million capital injection from SALAMA and the issuing of a $40 million subordinated debt in 2006, which were raised to support the company’s recent premium growth and future business plans.” Best expects the Company’s risk-adjusted capitalization “to remain supported by a low risk volatility (mainly short tail business) and by strong underwriting earnings.”

In addition Best noted that, following the benign 2006 loss year -unlike 2005 – BEST Re’s combined ratio could “improve by five percentage points to approximately 86 percent and pre-tax profits between $9-10 million in 2006 ($7.1 million in the previous year), translating into a return on equity of 9 percent. BEST Re’s investment income is expected to remain marginal due to investments mainly being held in non-interest bearing securities and cedants’ deposits in accordance with the Islamic law.”

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