AM Best Affirms Credit Ratings of Insurance House P.S.C.

AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Insurance House P.S.C. (IH) (United Arab Emirates). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect IH’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).

IH’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Risk-adjusted capitalisation is expected to remain at the strongest level prospectively as the company executes its strategic plan. The company’s balance sheet strength is also supported by an appropriate liquidity profile and the use of a panel of financially sound reinsurers. Offsetting these balance sheet strength factors are the company’s relatively small capital base, which stood at AED 147.3 million as of third-quarter 2022 (USD 40.1 million), and its exposure to higher risk asset classes, which increase IH’s capital vulnerability to market volatility.

Since 2017, IH has demonstrated a track record of adequate underwriting performance. Over the period of 2017-2021, the company generated five consecutive years of operating profitability and achieved a weighted average return on equity (ROE) of 8.8%. IH’s operating performance over this period is comparatively stronger than the historically volatile and weaker results that it achieved prior to 2016. Operating performance has been supported by solid investment income, with a five-year (2017-2021) average net investment yield (including gains) of 2.9%, and robust technical profitability, illustrated by a five-year (2017-2021) weighted average combined ratio of 96.9%. In the context of highly competitive insurance market conditions in the UAE, AM Best expects IH’s underwriting performance to be challenged over the near term. IH reported a combined ratio of 100.5% for the nine-months to September 2023 (as calculated by AM Best).

IH’s underwriting profile is concentrated in the competitive UAE non-life insurance market, where the company has a modest share of total market premiums. Additionally, the business profile assessment reflects IH’s concentration in motor medical classes of business on a net basis. In 2022, the company returned to growth, following several years of reducing its top line, with a 35.4% increase in gross written premium (GWP) recorded over the nine months to September 2022 to reach AED 236.4 million. AM Best expects IH to continue to grow its underwriting portfolio in line with its strategic plan, although AM Best notes that profitable growth may prove challenging over the near term in light of highly competitive market conditions.

AM Best views IH’s ERM as marginal. In recent years, the company has taken actions to develop and formalise its ERM framework and strengthen its risk management capabilities. AM Best expects continual ERM developments, notably as the company further integrates its ERM function into its strategic decision-making process and in managing the challenging market conditions it faces.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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