A.M. Best Affirms Credit Ratings of Emirates Insurance Company P.S.C.
A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Emirates Insurance Company P.S.C. (EIC) (United Arab Emirates). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect EIC’s excellent business profile within the United Arab Emirates (UAE), its strong risk-adjusted capitalisation and its track record of good technical and operating performance. An offsetting rating factor is the company’s concentrated investment portfolio, which is weighted toward domestic equities.
EIC has maintained its ranking as the UAE’s fourth largest listed insurer, with gross written premium (GWP) growing by nine per cent during 2016, to reach AED 1.02 billion ($278 million). EIC’s profile is enhanced by Emirates Insurance Company International (EIC Intl), the company’s specialty reinsurance branch. EIC Intl provides EIC with greater product and geographical diversification, and accounts for 23 per cent of the company’s total GWP. The remaining 77 per cent of business is derived from EIC’s domestic market.
EIC’s risk-adjusted capitalisation remains very strong, with capital consumption largely driven by investment risk. Whilst A.M. Best recognises the shift in the company’s investment portfolio toward fixed-income investments, local equity holdings still constitute a significant portion of the company’s total investments at year-end 2016, accounting for 42 per cent. Despite EIC’s concentrated investment portfolio, its capital position remains sufficient to absorb volatility driven by these equity holdings. Internal capital generation is expected to remain limited by the company’s dividend policy, however, the company has a strong capital buffer to support future strategic initiatives.
The company’s technical performance is good, demonstrated by a five-year average combined ratio of 87 per cent, however, competitive market pressures, in addition to volatility in EIC Intl’s portfolio, has resulted in the combined ratio gradually increasing over the past five years to 92 per cent in 2016. EIC achieved an overall operating profit of AED 87 million ($24 million) in 2016, which was equivalent to a sound return on equity of nine per cent. Lower, albeit still strong, underwriting income has meant the company’s profits are weighted slightly in favour of investment income, with net investment income totalling AED 45 million ($12 million) during 2016.