LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Al Ahleia Insurance Company S.A.K.P. (Al Ahleia) (Kuwait). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Al Ahleia’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Al Ahleia’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The balance sheet strength further benefits from the absence of financial leverage and good financial flexibility through access to capital markets. An offsetting factor is the company’s significant holdings in private equity and real estate funds, which exposes its capital base to potential volatility. AM Best now views Al Ahleia’s dependence on reinsurance as modest, with high cession rates of its direct portfolio diluted by significant retention of reinsurance business written by the company’s subsidiary, Kuwait Reinsurance Company K.C.S.P. (Kuwait Re).
Al Ahleia has a five-year average (2015-2019) return on capital of 9.4%, supported by solid technical performance and positive, albeit volatile, investment earnings. The group’s direct insurance portfolio has a track record of excellent performance, supported by favourable inward reinsurance commissions. On a consolidated basis, technical margins are reduced by the lower profitability of reinsurance business underwritten by Kuwait Re; however, the reinsurance operation remains robust, demonstrated by a combined ratio of 96.5% in 2019. Prospective consolidated earnings are expected to reflect the continued excellent performance of Al Ahleia’s direct insurance operations, as well as the benefits of strategic decisions implemented by Kuwait Re to strengthen the profitability of its reinsurance portfolio.
Al Ahleia has an established position as a top four insurer in Kuwait’s direct market, with a leading market share in the commercial insurance segment. The group achieves geographical diversification through its reinsurance operation, Kuwait Re, which provides proportional and non-proportional cover to cedants in the Middle East and North Africa, Asia-Pacific and Central and Eastern Europe. On a consolidated basis, Al Ahleia wrote gross premiums of KWD 98.3 million in 2019, with Kuwait Re contributing KWD 54.2 million.
Whilst Al Ahleia and Kuwait Re have in place risk management frameworks considered appropriate for their specific risk profiles, Al Ahleia is still developing a comprehensive group-wide ERM framework. As the group’s risk profile continues to develop, it will become increasingly important for Al Ahleia to enhance its ERM capabilities, particularly in areas such as capital management and market risk.
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