LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Doha Insurance Group Q.P.S.C. (DIG) (Qatar). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect DIG’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 (ERM).
The company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), was assessed at the strongest level at year-end 2017. Capital requirements are driven largely by asset risk arising from the company’s investment portfolio, which is weighted toward domestic equities. However, DIG has an excellent liquidity position and a sufficient capital buffer to absorb volatility arising from these assets. Whilst DIG’s premium retention increased to 40% at year-end 2017 from 21% in 2013, the company still has a high reliance on reinsurers. Elevated levels of credit risk are mitigated through the use of a well-rated reinsurance panel.
DIG reported profit before tax of QAR 43 million for 2017, which was equivalent to a return on equity of 8%. Healthy investment income, which has historically driven the majority of net earnings for DIG, is offset by fair value losses recognised in other comprehensive income. The company’s core insurance operations in Doha continue to generate strong underwriting returns; however, volatility is introduced from DIG’s regional reinsurance operations, which suffered a number of large losses in 2017. Consequently, the company’s combined ratio increased to 99% in 2017 from 89% in 2016. During the first half of 2018, the loss ratio improved to 59%. Going forward, A.M. Best expects underwriting results to stabilise through the use of increased reinsurance purchasing and improved risk selection.
The company has an established profile in Qatar’s insurance market, where it benefits from being one of the leading national insurance companies and has a well-diversified underwriting portfolio, by line of business. The company benefits from a modest level of geographical diversification through its regional reinsurance division, which writes fire and engineering risks across the Middle East. Gross written premiums grew by 5% to QAR 543 million in 2017, and prospective growth is expected to be driven by regional life and specialty operations; however, A.M. Best notes this is associated with execution risk.
ERM has improved materially over the past 18 months, as the company integrates a more formal risk management framework while simultaneously raising the quality of the internal control environment. A.M. Best expects DIG to continue to enhance its ERM capability.
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