LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of Qatar Insurance Company S.A.Q. (QIC) (Qatar) and its primary subsidiary Qatar Reinsurance Company Limited (Qatar Re) (Bermuda). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect QIC’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The company’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), is assessed as strongest and incorporates the company’s large capital base of QAR 8 billion (USD 2.2 billion). QIC’s excellent financial flexibility has been highlighted by the company’s ability to successfully access the capital markets over the past three years. In AM Best’s opinion, these factors, in addition to strong internal capital generation and long-term capital support from shareholders, provides backing for QIC’s strategic initiatives, including those related to inorganic growth. The company’s investment risk profile has improved in recent years as a result of increasing allocations to cash, deposits and liquid fixed income instruments; as at year-end 2017 these assets accounted for 84% of the investment portfolio.
The company’s operating performance is assessed as strong, reflecting a five-year (2013-2017) weighted average return on equity of 12.8% (5.1% in 2017). Underwriting results during the past two years, particularly during 2017, have been impacted by U.S. catastrophe losses and Ogden rate adjustments in the U.K. motor segment. The company reported a combined ratio of 106% in 2017, and is expected to report a combined ratio close to 100% in 2018. Whilst performance has not been in line with expectations, the company has taken remedial actions to improve this, including adjustments to its reinsurance arrangements and a shift towards less volatile business lines. AM Best expects underwriting performance to improve over the medium term. Investment returns continue to be a source of stable income for QIC and AM Best believes this area of the business represents a competitive advantage, which is enhanced further by the company’s tactical use of operational leverage. Despite operating in a low yield environment, QIC has reported a five-year average investment yield (including gains) of 5.3%.
During 2017, QIC reported that gross written premium (GWP) grew by 17.7% to QAR 11.7 billion (USD 3.2 billion), driven primarily by its international subsidiaries and in particular Qatar Re. QIC enjoys a dominant position in Qatar’s insurance market and has a global footprint with approximately 75% of GWP emanating from outside of the Gulf Cooperation Council (GCC). QIC operates via branches and subsidiaries across the GCC, and its international presence includes: Antares, which gives QIC access to a portfolio of marine, casualty and aviation business written through Lloyd’s; and Qatar Re, which is a top 50 global reinsurer writing an internationally diversified portfolio. Qatar Re’s presence in the U.K. motor insurance market was enhanced during 2018 with the acquisition of Markerstudy’s insurance carriers, which have a portfolio of approximately USD 750 million in GWP.
The company’s business mix in its reinsurance operations has fluctuated materially in recent years, and is expected to continue evolving, which represents significant execution risk. Further development of the company’s ERM framework will be necessary to support the increasing complexity of its operations. Nevertheless, AM Best recognises key changes QIC has made to its exposure management and risk selection processes.
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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.
Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
