LONDON--(BUSINESS WIRE)--AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a+” from “a” and affirmed the Financial Strength Rating (FSR) of A (Excellent) of Orient Insurance PJSC (Orient) (United Arab Emirates). The outlook of Long-Term ICR has been revised to stable from positive while the FSR outlook remains stable. Concurrently, AM Best has assigned an FSR of A (Excellent) and a Long-Term ICR of “a+” to Orient Takaful Insurance Company (S.A.E.) (Orient Takaful) (Egypt), a subsidiary of Orient. The outlook assigned to these ratings is stable.
The ratings reflect Orient’s balance sheet strength, which AM Best categorises as very strong, as well as its very strong operating performance, neutral business profile and appropriate enterprise risk management.
Orient Takaful is a non-life Takaful insurer with a leading market position in the Takaful market in Egypt. The company is strategically important to Orient and strongly integrated into its operations, as well as the recipient of explicit support in the form of a parental guarantee. Accordingly, Orient Takaful receives full rating enhancement from its parent company.
The Long-Term ICR upgrade reflects Orient’s track record of consistently outperforming its peers in terms of underwriting and overall profitability, which has been largely free of material fluctuations despite severe competition and regulatory changes in the UAE market. Orient has a track record of very strong operating performance, as evidenced by the exceptional five-year (2014-2018) weighted average combined ratio and return on equity of 75.8% and 12.5%, respectively. The group consistently has maintained best-in-market underwriting profits. AM Best expects that Orient’s prudent approach to risk selection and focus on profitability over top-line growth will support continued strong technical performance.
Orient’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, with Best’s Capital Adequacy Ratio (BCAR) scores comfortably above 50% at the 99.6% confidence level. The group’s balance sheet strength is supported by its prudent reserving practices and strong liquidity position. The majority of capital consumption arises from the group’s investment portfolio, which includes a material strategic equity holding that accounted for approximately 24% of total invested assets at year-end 2018. The investment continues to create some volatility in Orient’s capital and surplus, owing to fair value movements. However, Orient has sufficient capital buffers to absorb these fluctuations. In addition, the group can utilise risk mitigation tools to dilute the potential impact of a material adverse fair value movement.
Orient’s solid business profile in the UAE, derived from the group’s strong brand and control over its distribution network, assisted the group in maintaining a leading market position. Orient’s business profile continues to benefit from its multichannel distribution network and affiliation with the Al-Futtaim group. AM Best expects Orient to increase its penetration within the UAE’s life segment and continue to develop its regional presence in line with the Al-Futtaim group’s expansion where feasible.
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