The ratings reflect Alliance’s balance sheet strength.
A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Alliance Insurance (PSC) (Alliance) (United Arab Emirates). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Alliance’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
Alliance’s balance sheet strength is underpinned by risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), which is consistent with the strongest assessment. Furthermore, balance sheet strength benefits from a conservative investment strategy, low underwriting leverage and a well-rated reinsurance panel, which mitigates the credit risk associated with the company’s significant reinsurance dependence. A.M. Best expects Alliance’s prospective risk-adjusted capitalisation to remain at the strongest level, with good internal capital generation supporting the company’s strategic initiatives. The company also benefits from an unleveraged balance sheet and excellent liquidity.
Alliance’s strong operating performance is demonstrated by a track record of consistently excellent results. In 2017, overall earnings stood at AED 48.2 million ($13.1 million), which translated into a 10.2 per cent return on equity. Alliance’s earnings are supported by a solid underwriting performance, with life business generating a 14.6 per cent gross profit margin and the non-life segment generating a combined ratio of 73.9 per cent in 2017. Profitability was supplemented by earnings from the company’s conservative and stable investment portfolio, which yielded a 5.1 per cent return.
Alliance is a mid-tier composite insurance company operating solely in the United Arab Emirates. A.M. Best considers the company’s underwriting portfolio to be well-balanced between life and general insurance products. Reinsurance dependence is high and, despite gradually increasing, premium retention on non-life business remained low in 2017 at 24 per cent of GWP. Overall gross premiums declined marginally by 3.9 per cent in 2017, to AED 289 million ($79 million), reflecting portfolio cleansing as well as the highly competitive insurance market in the UAE