LONDON--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and 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). Concurrently, AM Best has withdrawn these Credit Ratings (ratings) as the company has requested to no longer participate in AM Best’s interactive rating process.
The ratings reflect DIG’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
The revised outlooks reflect the continued deterioration of DIG’s underwriting performance, as well as concerns regarding the group’s underwriting risk management practices. In recent years, the group’s technical earnings have experienced decline, falling below historical averages and regional peers.
In 2018, the group reported a technical loss of QAR 7.7 million (2017 losses: QAR 0.7 million), translating into a combined ratio of 101%. Whilst DIG’s core insurance operations in Qatar continue to generate strong underwriting returns, these have been offset by large losses stemming from the group’s regional property reinsurance operations. Despite the underwriting loss, the group still generated a healthy operating profit of QAR 62 million in 2018, which was boosted by a one-off gain from the sale of real estate. Although DIG has undertaken remedial actions to improve technical performance, including putting its property reinsurance operations into run-off towards the end of 2018, considerable uncertainty and execution risk remain relating to the group’s strategic initiatives.
The group’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), was assessed at the strongest level at year-end 2018. Capital requirements are driven largely by asset risk arising from the group’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 has increased in recent years to 41% at year-end 2018 from 21% in 2013, the group remains reliant on reinsurance. Elevated levels of credit risk are mitigated partially through the use of a well-rated reinsurance panel.
DIG 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 group achieves a modest level of geographical diversification through its regional reinsurance division, historically focused on property and engineering risks across the Middle East. Although gross written premiums grew by 15% to QAR 624 million in 2018, prospective growth is anticipated to be muted as the group places its property and engineering reinsurance book into run-off.
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