AM Best Affirms Credit Ratings of Saudi Arabian Insurance Co B.S.C. (c)

LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Saudi Arabian Insurance Company B.S.C. (c) (Damana) (Bahrain). The outlook of these Credit Ratings (ratings) is negative.

The ratings reflect Damana’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and marginal enterprise risk management (ERM). The ratings also factor a neutral impact from the company’s ultimate ownership by Mawarid Holding Company (Mawarid).

Damana’s balance sheet strength assessment is underpinned by risk-adjusted capitalisation which was at the strongest level as at year-end 2022, as measured by Best’s Capital Adequacy Ratio (BCAR). Investments previously held in a centralised group treasury account have been fully liquidated as of the first quarter of 2023, as mandated by the Central Bank of Bahrain in late 2020. Overall, AM Best views the company to have a moderate risk investment strategy, including concentrations to affiliated and unaffiliated equities.

Damana’s operating performance is viewed as marginal. Over recent years, Damana has generated combined ratios in excess of 100% (as calculated by AM Best), reflective of considerable expense strain arising from its operating model and business scale. In addition to the expense ratio pressures, the company’s loss ratio deteriorated in 2021 and 2022 amid underperformance of motor and medical lines of business.

Damana reported gross written premiums (GWP) of BHD 16.8 million in 2022, an increase of 8.6% compared with the previous year as the company executed strategic growth actions. This follows a contraction in GWP in 2021, which was in part attributable to regulatory restrictions imposed by the Central Bank of Bahrain on the company’s operations in Bahrain in the second half of the year. This restriction was lifted in December 2021, resulting in return to growth in 2022. AM Best expects GWP growth in 2023, however, acknowledges the challenging and competitive conditions in the company’s core markets of Bahrain, the United Arab Emirates, Oman and Kuwait.

The negative outlooks reflect the challenges faced by Damana in the execution of its business plan and the ability to achieve underwriting and operating profitability over the medium term. In addition, AM Best views the company’s investment strategy to drive a heightened potential for volatility in balance sheet fundamentals, including risk-adjusted capitalisation.

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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.