Doha Bank Assurance placed on CreditWatch Negative by S&P
S&P Global Ratings has placed its 'BBB+' long-term insurer financial strength and counterparty credit ratings on Qatar-based insurer Doha Bank Assurance Co. LLC (DBAC) on CreditWatch with negative implications.
In a statement issue by the ratings agency, S&P continues to view DBAC as a strategically important subsidiary of Doha Bank, given its contribution to the bank's product offering, as well as integration of management and some operational functions. S&P’s ratings on DBAC therefore benefit from two notches of support above its stand-alone credit profile (SACP).
Since the action by a group of states—including Saudi Arabia, the United Arab Emirates (UAE), Bahrain, Egypt, Libya, and Yemen—to sever ties with Qatar, local equity markets have already seen losses; however, the negative effect on DBAC's performance is limited, S&P suggests that due to its relatively low portfolio allocation to equity investments. Should the current political situation persist for an extended time, DBAC might be exposed to a general slowdown in both new business and collections. This would result in our reassessing our expectations for the company's growth and profitability.
DBAC's capital adequacy remains above our 'AAA' benchmark and its liquidity position exceptional. In the event of a general tightening of liquidity and a slowdown in premium collections, S&P believes that these qualities would help to insulate the company and preserve its claims-paying ability.
The negative CreditWatch placement reflects that on Doha Bank. S&P expects
DBAC's capital adequacy to remain extremely strong, supporting what S&P regards as ambitious growth plans over the next two years. We also anticipate that DBAC will continue to expand its cooperation with its parent to strengthen its market position through profitable growth.
S&P expects to resolve this CreditWatch within 90 days, when further details emerge regarding the ongoing political developments in the Gulf Cooperation Council and any effect they have on the ratings on Doha Bank. Upon resolution of the CreditWatch, S&P will either affirm the ratings or lower them.