LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Saudi United Cooperative Insurance Company (Wala’a) (Saudi Arabia). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect the company’s improving technical profitability, adequate level of risk-adjusted capitalisation and developing profile within its domestic insurance market. An offsetting rating factor is the volatility in the company’s technical performance in recent years.
The company’s risk-adjusted capitalisation has strengthened over the past two years and remains supportive of the current ratings. Whilst a successful rights issue boosted paid-up capital by SAR 200 million in 2015, the benefit of the capital injection was tempered by a significant growth in net premium and reserve risk, coupled with an underwriting loss of SAR 58 million (USD 16 million) for the year. The company’s capital position is directly impacted by operating performance, and a strong result in the first nine months of 2016 has helped capital and surplus rise to SAR 394 million (USD 105 million). Prospective risk-adjusted capitalisation will be affected by the company’s growth plans, dividend policy and its ability to generate capital internally.
The company’s underwriting earnings have declined over the past three years contributing to a five-year average combined ratio of 100%. However, strategic decisions taken by management to improve results in its key motor line of business, such as enforcement of actuarial based pricing and a more focused sales approach, have seen underwriting profits improve in 2016, leading to a total comprehensive profit for the year-to-September 2016 of SAR 71 million (USD 19 million), compared with a loss of SAR 81 million (USD 22 million) for the same period in 2015. Investment income has remained stable over the period, reflective of the company’s conservative investment portfolio.
Wala’a has a developing profile in the Saudi Arabian insurance market. Gross written premiums have grown rapidly to SAR 756 million (USD 201 million) in 2015 from SAR 234 million (USD 63 million) in 2012. Growth has been driven by a combination of new business opportunities, and material rate increases following regulatory changes to motor reserving and pricing practices in Saudi Arabia. The domestic operating environment remains competitive, and Wala’a has plans to grow significantly in the near future. Whilst this planned growth will enhance the company’s profile, there will be increasing capital requirements that could put pressure on its risk-adjusted capitalisation. A.M. Best will continue to closely monitor the company’s capital position during this period.
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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