A.M. Best Affirms Credit Ratings of Al-Sagr National Insurance Company P.S.C.
Emily Thompson, +44 20 7397 0291
Associate Financial Analyst
Salman Siddiqui, ACA, +44 20 7397 0331
Associate Director, Analytics
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations
A.M. Best has affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Al-Sagr National Insurance Company P.S.C. (ASNIC) (United Arab Emirates). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect ASNIC’s balance sheet strength, which A.M. Best categorises as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.
ASNIC’s balance sheet strength is underpinned by the company’s risk-adjusted capitalisation being at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Offsetting rating factors include the high concentration of the company’s investment portfolio in volatile domestic real estate and equity assets. In addition, the company also suffers from poor cash collection from a variety of debtors (including reinsurers and related parties). Cash generated from the company’s operations has been negative since 2016, as a result, the company’s liquidity position requires continuous support from overdraft facilities, which, following a period of repayment, saw further drawdowns in the first half of 2018.
ASNIC’s historical operating performance has been subject to volatility, with fluctuations arising from both technical and non-technical activities. This translated to a modest five-year average (2013-2017) return on equity of 1.0%. In 2017, the company registered a net profit of AED 20.1 million (2016: 20.7 million). This was the result of an improved underwriting performance, with a loss ratio of 87.5% (2016: 97.5%), stemming from enhanced risk selection and underwriting discipline, which offset weaker investment returns. Whilst results for the first half of 2018 indicate continued focus on technical profitability, with a loss ratio of 80.0%, the continued high level of overdue receivables on the company’s balance sheet could lead to material negative adjustments to net profits in the medium term.
ASNIC has a modest business profile as a mid-tiered insurer within the UAE market having generated gross written premium of AED 396.3 million in 2017. Despite some product diversification, the company’s primary focus is on the motor and medical lines of business. In addition, since the sale of its Jordan operations in the end of 2017, the company’s profile is concentrated solely in the UAE.
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper [..].
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