LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Insurance House P.S.C. (IH) (United Arab Emirates). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect IH’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
IH’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). In addition, the company maintains a panel of financially strong reinsurers and a good level of liquidity. In 2019, IH strengthened its capital adequacy through the issuance of AED 15 million (approximately USD 4.1 million) of perpetual subordinated bonds, bringing it in line with local minimum solvency requirements. Offsetting balance sheet factors include the company’s small overall capital base and material exposure to higher risk asset classes, which exposes its capital position to potential volatility.
IH’s historical operating performance has been volatile due to material underwriting losses. However, following a change in senior management in 2016, IH embarked on strategic initiatives to stabilise its operations, adopting stricter underwriting controls and tighter claims management. Successful execution of these remedial measures lead to a reduction in the combined ratio to 97.4% in 2019, compared with 122.5% in 2016. The company’s investment portfolio continues to contribute positively to its overall profitability, producing an investment yield (including gains) of 3.6% in 2019. AM Best expects IH’s operating performance metrics to remain robust over the coming years, as the company executes its business plan.
IH has a modest share of the UAE non-life market, writing AED 235.8 million (USD 64.1 million) in gross written premium in 2019. In line with peers operating in the UAE, the company writes predominantly motor and medical insurance business on a net basis. AM Best expects IH to continue to grow in line with its ambitious business plan, although market conditions remain challenging given the high level of competition in the company’s target segments.
AM Best views IH’s ERM as marginal. In recent years, the company has begun formalising its risk management framework, more closely aligning its controls and procedures to its risk profile. AM Best expects management to make meaningful enhancements to the ERM framework, as it continues with its strategic transformation of the company over the coming years.
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