LONDON--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Alliance Insurance (PSC) (Alliance) (United Arab Emirates). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Alliance’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
Alliance’s risk-adjusted capitalisation is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects the company to maintain a significant capital buffer in excess of the threshold required for the strongest BCAR assessment, supported by good retention of earnings, low underwriting leverage and a conservative investment portfolio. An offsetting factor is the company’s reliance on reinsurance for non-life insurance risks. The associated credit risk is, however, partially mitigated through the use of a panel of financially strong reinsurers. The ratings also consider AM Best’s assessment of country risk in the UAE, which includes low economic and financial system risks and moderate political risk.
Alliance has produced a five-year (2017-2021) weighted average return on equity (ROE) of 8.9%, which is considered strong in the context of the company’s high levels of risk-adjusted capitalisation. Underwriting results remain strong, driven by the company’s life insurance portfolio, which accounted for over 80% of the 2021 total combined technical result. While the company has demonstrated solid non-life underwriting performance, posting a five-year (2017-2021) weighted average combined ratio of 82.1% (as calculated by AM Best), technical results have deteriorated due to the competitive market conditions prevailing in the UAE. In 2021, Alliance reported a non-life underwriting profit of AED 3.9 million, equating to a combined ratio of 91.6%. Nevertheless, AM Best expects that Alliance’s strategic focus on underwriting profitability and its robust earnings generated from the life segment will support continued strong technical performance over the coming years.
Alliance’s business profile as a mid-tier domestic market participant is unlikely to change over the near term as the company has limited product diversification and operates in an increasingly competitive market. While Alliance has been successful in its current strategy of focusing on the delivery of strong underwriting results, finding profitable growth opportunities will be a challenge while operating solely in the UAE.
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