A.M. Best has confirmed that the financial strength rating of “B++ (Good)” and the issuer credit rating of “bbb” of Saudi United Cooperative Insurance Company (Wala’a) will remain unchanged following the successful completion of the company’s $64 million rights issue.
The rights issue, which was completed in June 2015, bolstered the company’s capital position, doubling shareholders’ paid-up capital from $53 million to $106 million. In addition, the company received $11 million in share premium.
A.M. Best has noted that Wala’a is the only insurance company to receive a premium for its shares amongst the recent rights issues by various Saudi Arabian insurance companies.
Proceeds from the rights issue are expected to support increasing levels of underwriting activity and higher premium retention. The rights issue also improves the company’s risk-adjusted capitalisation, which was previously under pressure.
The agency stated: “Wala’a’s capitalisation is projected to remain strong through good internal capital generation and by maintaining a sufficient buffer for strategic initiatives over the next few years.”
The company produced an overall loss after zakat (an Islamic form of tax) of $1 million in 2014 compared with a profit after zakat of $5.8 million in 2013.
According to A.M. Best, the poor result was driven by a significantly larger zakat charge and higher underwriting losses from the company’s motor line of business.
