LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Alliance Insurance (PSC) (Alliance) (United Arab Emirates). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Alliance’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
Alliance’s risk-adjusted capitalisation is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects the company’s BCAR scores to remain comfortably above the threshold required for the strongest BCAR assessment, supported by good retention of earnings, low underwriting leverage and conservative investment portfolio. An offsetting factor is the company’s reliance on reinsurance for non-life insurance risks. The associated credit risk is, however, partially mitigated through the use of a panel of financially strong reinsurers. The ratings also consider AM Best’s country risk assessment of low economic and financial system risk and moderate political risk in the UAE.
Alliance has a track record of strong operating performance, as evidenced by a five-year (2016-2020) weighted average return on equity (ROE) and return on gross written premium of 9.4% and 15.3%, respectively. Underwriting results remain strong and driven by the company’s life insurance portfolio, which accounted for over 80% of the 2020 total combined technical result. Over the cycle, the company has demonstrated solid non-life underwriting performance, posting a five-year (2016-2020) weighted average combined ratio of 77.1% (as calculated by AM Best). In 2020, Alliance reported a non-life underwriting profit of AED 4.3 million, equating to a combined ratio of 88.8%. AM Best expects that Alliance’s strategic focus on underwriting profitability will support continued strong technical performance over the coming years, despite competitive market conditions prevailing in the UAE.
Alliance’s business profile as a midtier domestic market participant is unlikely to change over the near term, as the company has a limited product diversification and operates in an increasingly competitive market. While Alliance has been successful in its current strategy to focus on delivering strong underwriting results, finding profitable growth opportunities will be a challenge while operating solely in the UAE.
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