AM Best has placed insurance group Gulf Insurance Group (GIG) and its subsidiary Gulf Insurance and Reinsurance Company under review with developing implications of their Financial Strength Rating of A (Excellent).
The rating agency’s actions follows GIG’s acquisition of AXA’s insurance operations in the Gulf region for $475 million.
Last week, the company agreed to acquire 100% of AXA Insurance in Bahrain, 50% of AXA Cooperative Insurance Company in Saudi Arabia and 28% of AXA Green Crescent Insurance Company in the United Arab Emirates.
A capital injection will be provided to GIG, by its existing shareholders, to help fund the acquisition. The balance is expected to be funded through bank debt, and the earnings of the target companies following year-end 2020.
AM Best explained that the under review with developing impications status of GIG’s ratings reflects uncertainty over the group’s post-acquisition risk-adjusted capitalisation, leverage and liquidity.
The acquisition is expected to add gross written premium (GWP) of approximately $1 billion to the GIG group (GWP of $1.3 billion in 2019), give it access to the insurance markets of Oman, Qatar and the UAE, and strengthen its competitive position in Bahrain and Saudi Arabia.
The ratings will remain under review until the group’s post-acquisition metrics for risk-adjusted capitalisation, leverage and liquidity are clear.
