LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a” of Orient Insurance PJSC (Orient) (United Arab Emirates). The outlook for both ratings remains stable.
The ratings reflect Orient’s track record of excellent technical performance, very strong risk-adjusted capitalisation and solid business profile in the United Arab Emirates (UAE). Offsetting rating factors include the company’s concentrated investment portfolio and developing enterprise risk management.
Orient has consistently reported excellent technical results over the past five years. The company’s non-life operation has generated an exceptional five-year average combined ratio of 64.0% (2010 to 2014). Orient’s life business has also reported good profits in each of the past five years. Excellent underwriting performance has been maintained despite prevailing competitive market conditions in the UAE, with significant pressure on premium rates across most lines of business. Orient’s prudent approach to risk selection and focus on profitability over top-line growth is expected to support future technical performance.
Orient’s risk-adjusted capitalisation remains very strong. The company’s capital requirements, as measured by Best’s Capital Adequacy Ratio, continue to be driven by a single strategic equity holding, which accounted for approximately 45% of total invested assets at year-end 2014. Although this investment may create volatility in Orient’s prospective risk-adjusted capitalisation, the company has a sufficient buffer in capital adequacy to absorb fluctuations in the market value of this holding.
Orient maintains a solid business profile and a market leading position in the UAE. The company’s premium base surpassed AED 1.8 billion (USD 490 million) in 2014, ranking it as the third largest listed insurer in the UAE. Orient’s profile continues to benefit from its multi-channel distribution network and its affiliation with the Al-Futtaim group. Going forward, the company is expected to increase its penetration in the life segment of the UAE, as well as grow its regional footprint in-line with the Al-Futtaim group’s expansion.
The company’s enterprise risk management capability remains adequate relative to its risk profile. Despite improvement in the identification and quantification of key risks during 2014, the company’s approach to controlling and mitigating risk remains an area for improvement. Given the company’s plans to expand its regional operations over the medium term, a more robust risk management framework will be necessary as the complexity of the company’s risk profile increases.
Positive rating actions could result from the strengthening of the company’s approach to enterprise risk management and the successful development of an international profile. Negative rating actions could arise from a material reduction in risk-adjusted capitalisation or from a significant and prolonged deterioration in operating performance.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilised:
- Catastrophe Analysis in A.M. Best Ratings
- Evaluating Country Risk
- Evaluating Non-Insurance Ultimate Parents
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding Universal BCAR
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure.
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