Monday 26, December 2016 by Georgina Enzer

A.M. Best affirms Credit Ratings of Qatar Insurance Company S.A.Q. and its main subsidiaries

A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "a" of Qatar Insurance Company S.A.Q. (QIC) (Qatar) and its main subsidiaries: QIC International LLC (QICI) (Qatar) and Qatar Reinsurance Company Limited (Qatar Re) (Bermuda).

The outlook of these Credit Ratings (ratings) remains stable.

The ratings of QIC reflect its very strong risk-adjusted capitalisation, robust underwriting performance and global business diversification. Offsetting rating factors are QIC's investment concentration in Qatar and the execution risk associated with rapid growth of the group, particularly within its reinsurance arm.

QIC's risk-adjusted capitalisation remains very strong, despite considerable additional capital requirements created by acquisitions and the rapid expansion of Qatar Re. A.M. Best expects risk-adjusted capitalisation to remain strong, benefiting from a high level of internal capital generation. Additionally, QIC's supportive shareholders provide the company with good financial flexibility.

The company has a strong track record of operational performance, with a five-year weighted average return on equity of 16.7 per cent. Underwriting performance strengthened in 2015, with a combined ratio of 91.1 per cent, which reflected strong improvements in Qatar Re’s technical profitability combined with continued earnings stability from QIC's domestic insurance operations. QIC's profit for the year was QAR 1.1 billion ($292.5 million), although profitability remains heavily weighted toward investment income. In the first three quarters of 2016, QIC generated an operating profit of QAR 726.1 million ($199.5 million), broadly in line with the same period in 2015, with a combined ratio of 95 per cent.

Continued expansion in the group’s reinsurance operations translated into QIC experiencing year-on-year growth of 48.7 per cent, to reach gross premiums written (GWP) of QAR 8.3 billion ($2.3 billion) in 2015. In the first nine months of 2016, QIC reported GWP growth of 43.8 per cent, driven by growth in its Qatari insurance operations as well as its insurance and reinsurance operations in Europe. QIC enjoys a dominant position in the Qatari market and has a global reach, with 73 per cent of gross premiums emanating from abroad in 2015. QIC consolidates QICI, which has a sound position in the United Arab Emirates market; Antares, which gives the group access to a portfolio of marine, casualty and aviation business written through Lloyd's; and Qatar Re, which is a global top 50 reinsurer writing an internationally diversified portfolio. The establishment of QIC Europe Limited in 2015 expands the group’s access to direct business in the European Economic Area (EEA). The rapid expansion of Qatar Re continues to represent material execution risk. Furthermore, given the changing complexity of the group, QIC has made significant improvements in group-wide risk management, incorporating capital modeling into strategic decisions and bolstering catastrophe modeling and actuarial capabilities.

The ratings for QICI and Qatar Re reflect their importance to the group’s strategy and incorporate a strong level of financial support from QIC, as evidenced by a guarantee provided on both companies, as well as capital injections and an internal quota share arrangement to support business written at Qatar Re.

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