S&P downgrades Kuwait’s Wethaq Takaful

Ratings cut to 'BB' as agency notes continuing uncertainty at parent co. Investment Dar.

Ratings agency Standard & Poor's on Wednesday said it has lowered its long-term counterparty credit and insurer financial strength ratings on Kuwait-based Wethaq Takaful Insurance Co. K.S.C. to 'BB' from 'BB+'.At the same time, the ratings were removed from CreditWatch with negative implications, where they were placed on May 27, 2009. The outlook is negative.

"The rating action reflects both the uncertainties regarding the impact of the troubles at parent Investment Dar (Dar) on Wethaq, and Wethaq's weakening financial and business profile," said S&P credit analyst Lotfi Elbarhdadi.

S&P expects Wethaq's competitive position to remain marginal, suffering from stiff competition.

Uncertainties regarding the outcome of troubles at Dar are likely to have a negative impact on Wethaq's business and financial profile, although the agency noted Wethaq's independent balance sheet and regulated insurance company status could minimise this impact.

''We expect Wethaq to maintain at least "good" capital adequacy based on our risk-adjusted capital adequacy criteria. The company should post a 105% to 110% net combined ratio in 2009. Finally, Wethaq should post flat growth in 2009 compared with 2008,'' the agency said in a statement.

The agency added it would lower its rating if the company does not reach the above-mentioned targets in 2009, or if the outcome of its parent's restructuring is more negative than expected.

On the other hand, if Wethaq exceeds the targets and ultimately survives its parent’s troubles, the outlook may be upgraded to stable.

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