Gulf Insurance Co. K.S.C. outlook to positive on reduced risk profile; ratings affirmed

At the same time, Standard & Poor's affirmed its 'BBB+' long-term counterparty credit and insurer financial strengths ratings on the company.

"The outlook revision is due to a substantial reduction in Gulf Insurance's risk profile following the sale of its largest equity holding," said Standard & Poor's credit analyst Nigel Bond.

The ratings reflect Gulf Insurance Group's strong operating performance, strong competitive position, and strong, but volatile, capitalization. These positive factors are offset by the group's weak enterprise risk management (ERM).

The ratings on Gulf Insurance are significantly influenced by the ratings on Kuwait Projects Co. (Holding) K.S.C. (BBB-/Positive/A-3), the ultimate parent. Subject to this, the positive outlook reflects Standard & Poor's expectation that Gulf Insurance Group will noticeably improve its ERM. Capital adequacy is likely to remain volatile, but should be at least in the 'A' (strong) range in order to support a higher rating.

Given the historical volatility of the investment performance and capital adequacy of the group, it is unlikely that the ratings will be raised without the successful introduction of clear risk tolerances, especially for asset risks, and a positive assessment by Standard & Poor's of their impact on the risk profile of the group. This is expected to take at least one year, and probably longer.

In addition, Standard & Poor's expects the net combined ratio in 2007 to remain less than 100% and life profitability to decline, but that net profit will exceed comfortably the Kuwaiti dinar 34.8 million public expectation of the group. Failure to meet the above expectations may lead to negative rating action being taken.