LONDON--(BUSINESS WIRE)--AM Best has upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a+” (Excellent) from “a” (Excellent) and affirmed the Financial Strength Ratings of A (Excellent) of Gulf Insurance Group K.S.C.P. (GIG) and Gulf Insurance and Reinsurance Company K.S.C. (Closed) (GIG-Kuwait) (both domiciled in Kuwait). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect GIG’s consolidated balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
GIG-Kuwait is a composite insurer with a leading position in Kuwait’s insurance market. The company is strategically important to GIG and integrated into its operations.
The Long-Term ICR upgrade reflects AM Best’s recognition of implicit support provided to GIG by its ultimate parent, Fairfax Financial Holding Limited (Fairfax) [TSX: FFH], which has recently increased its holding to 97.1%. GIG’s ratings benefit from the favorable financial flexibility and significant capital resources of the ultimate holding company. In addition, GIG benefits from shared expertise including ERM, reinsurance, actuarial, talent and investment management among other less quantifiable benefits, such as best practices and capital management.
GIG’s balance sheet strength assessment is underpinned by consolidated risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects that GIG will maintain BCAR comfortably above the threshold for the strongest assessment level. GIG’s balance sheet strength benefits from a comprehensive reinsurance programme and a relatively conservative investment strategy. The group’s balance sheet is exposed to a moderate level of financial leverage, which is expected to diminish over the medium term, as well as elements of country risk through its regional operations.
GIG is amongst the largest and most diversified insurance groups in the Middle East and North Africa (MENA) region. GIG holds leading positions across its core markets, which include Kuwait, Jordan, Bahrain, Saudi Arabia, the United Arab Emirates, Qatar, Oman, Egypt, Turkey and Algeria. The group has profitably grown its footprint across the MENA region in recent years through acquisitions, including that of Gulf Insurance Group (Gulf) B.S.C. (c) in 2021, and organic growth. The group reported insurance service revenue of KWD 0.82 billion (USD 2.7 billion) in 2023.
On 12 September 2024, the Kuwait Ministry of Health notified GIG of its decision to revoke the health insurance contract for retired citizens (AFYA) with immediate effect. With this being a particularly large insurance scheme, gross written premium for the group is likely to remain broadly flat for 2024 but decline in 2025. Furthermore, GIG is expected to comfortably manage the financial strain caused by the revocation.
The group has a record of strong operating performance and in 2023 reported post-tax profits of KWD 29.5 million (USD 96.3 million), equating to a return on equity of 8.0%, as calculated by AM Best. Earnings for the year were supported by positive underwriting and investment results, with a net investment return of 5.4%, as calculated by AM Best, despite taking an KWD 10.8 million impairment on an investment. GIG reported healthy results for the first six months of 2024, with a post-tax profit of KWD 18.9 million.
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