Standard & Poor's Ratings Services on Wednesday lowered its long-term counterparty credit and insurer financial strength ratings on Oman United Insurance Company (OUIC) to 'BBB-' from 'BBB', but said the outlook was stable.

OUIC's competitive position has been negatively affected by regulatory changes to motor insurance and more constrained product distribution in certain lines, said a S&P statement.

'The downgrade reflects our view that despite remaining Oman's second-largest insurer, OUIC's business profile has weakened as a result of a decline in its competitive position,' remarked Standard & Poor's credit analyst Neil Gosrani.

'This is due to attempts to substantially increase motor rates following the authorities' introduction of a unified motor policy in July 2008, and from more constrained distribution given the withdrawal from an existing agreement,' he added.

In addition, the company has suffered some management instability in 2008 and new strategies need to be implemented, Gosrani pointed out.

Weak operating performance, particularly from the motor book of business, has placed pressure on the company's current earnings and combined with weakness in the local equity market has put downward pressure on OUIC's risk-adjusted capital adequacy.

In 2008, OUIC recorded about RO6 million ($15.5 million) of fair-value asset losses and impairments on investments, although shareholders' capital remains satisfactory at RO15.5 million ($40.2 million) as on March 31, 2009.

'The stable outlook on OUIC reflects our view that capital adequacy and operating performance will gradually improve as the company brings greater selectivity and therefore greater stability to its underwriting performance,' he added.-TradeArabia News Service