LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of Gulf Insurance Group K.S.C.P. (GIG) and its subsidiary, Gulf Insurance and Reinsurance Company K.S.C. (Closed) (gig-Kuwait) (both domiciled in Kuwait). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect GIG’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
gig-Kuwait is a composite insurer with a leading position in the Kuwaiti insurance market. The company is strategically important to GIG and strongly integrated into its operations. Accordingly, gig-Kuwait receives full rating enhancement from its parent company.
GIG’s balance sheet strength is underpinned by its risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Whilst GIG has historically maintained sufficient capital buffers to accommodate higher levels of growth, the group’s risk-adjusted capitalisation in 2017 was impacted negatively by increased capital requirements stemming from newly acquired subsidiaries and higher underwriting risk from sizable new contracts in Kuwait. Nevertheless, GIG’s BCAR scores were still assessed at the strongest level. Management actions to alleviate pressure on its capital position so far have been limited and further acquisitions may strain prospective risk-adjusted capitalisation. The group possesses the tools and capabilities to manage its internal capital to support its operations; however, the lack of timely responses to issues within the group has highlighted deficiencies in GIG’s risk management culture.
GIG’s balance sheet continues to benefit from a comprehensive reinsurance program supported by well-rated counterparties and strong liquidity. However, A.M. Best notes that the group’s liquidity requires continuous support from its overdraft facilities, which were utilised considerably in 2017. As a result, GIG’s financial leverage increased materially during the year, but remains within tolerance levels for its balance sheet assessment. The group is looking to reduce its reliance on overdraft facilities by seeking alternative solutions for its working capital needs.
GIG is amongst the largest and most diversified insurance groups in the Middle East and North Africa region, with market leading positions in Kuwait, Jordan and Bahrain, supplemented by strong footprints in Egypt, Turkey and Algeria. The group has demonstrated a track record of strong operating performance, returning a five-year (2013-2017) average return on equity of 13%, despite extraordinary accounting adjustments deflating net profits in 2016 and 2017. GIG’s earnings remain anchored by its technical performance, which has generated a solid five-year (2013-2017) average combined ratio of 90%.
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