A.M. Best has affirmed the financial strength rating of “A- (Excellent)” and the issuer credit rating of “a-” of Emirates Insurance Company (EIC) of the United Arab Emirates. The outlook for both ratings remains stable.
According to the agency, the ratings reflect EIC’s “solid” risk-adjusted capitalisation, leading market position in the United Arab Emirates and “consistently strong” profitability. An offsetting rating factor is EIC’s concentrated investment profile heavily weighted toward domestic equities.
A.M. Best has stated that EIC’s solid risk-adjusted capitalisation remains is thanks to low underwriting leverage and a reinsurance programme of “good credit quality”.
Capital requirements are driven by EIC’s exposure to domestic equities, which accounted for 50 percent of invested assets at year-end 2014.
Despite EIC’s high dividend distribution in recent years, the company’s risk-adjusted capitalisation is sufficiently strong to absorb the expansion into inward facultative business, increased premium retention and volatility generated by its investment portfolio.
EIC’s profile has improved in recent years with the successful diversification into the specialty reinsurance business from the Afro-Asian region, which contributes approximately 20 percent to premium revenue.
EIC recorded an increase in its gross written premium of 17 percent to $229 million in 2014.
A.M. Best has said that, given the strategic shift in its profile, EIC needs to ensure that this new business segment is adequately controlled and managed.
The agency added: “EIC has demonstrated a track-record of strong technical profitability with a five-year average combined ratio of 82 percent, primarily driven by specialty reinsurance, engineering, motor and energy business lines.”
In 2014, technical profitability fell by 16 percent to $11 million. The decrease was mainly attributable to several large market losses in the property line of business.
A.M Best has confirmed that EIC’s investment profile remains “highly exposed” to equity investments, which can be a source of volatility for its capital position and operating performance. EIC achieved a stable return on equity of 10 percent in 2014.
