LONDON, 23 December 2015
A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of "bbb+" of Arab Insurance Group (B.S.C.) (Arig) (Bahrain). The outlook for both ratings remains positive. The ratings reflect Arig's solid risk-adjusted capitalisation and strong business profile. An offsetting rating factor is Arig's weak technical profitability, which has been negatively impacted by the continued poor performance of its subsidiary, Takaful Re Limited (Takaful Re).
Arig's risk-adjusted capitalisation remained strong in 2015, with capital and surplus growing to USD 265 million at year-end 2014 (2013: USD 249 million). Arig's risk-adjusted capitalisation is supported by modest underwriting leverage, conservative asset allocation and prudent reserving. A.M. Best expects Arig's prospective risk-adjusted capitalisation to remain strong and sufficient to absorb the company's strategic initiatives.
Arig maintains a strong business profile in its key markets in the Middle East and North Africa region, built upon the company's excellent reputation and close relationships with cedants. In addition, the company benefits from its exposure to the Lloyd's market via its investment in Arig Capital Limited (a corporate member at Lloyd's). Participation in Lloyd's syndicates that focus on specialty lines represents just over one quarter of the company's gross written premium. The majority of Arig's reinsurance portfolio is written on a treaty basis and is not heavily exposed to natural catastrophes. Going forward, the composition of Arig's underwriting portfolio is not expected to change materially; however, moderate increases in facultative business are anticipated as the company looks to target higher margin products.
Arig has a good track record of operating profitability, reporting a net profit of USD 11 million in 2014, with strong investment returns compensating for weak technical results. The poor technical performance in 2014 was driven by Takaful Re's continued underwriting losses, which offset modest technical profits from Arig's 'core' portfolio (representative of Arig's own underwriting book, along with its Lloyd's participations). In recent years, Takaful Re has added approximately 4-6% to ARIG's combined ratio. Following a shareholder's decision, Takaful Re has now ceased underwriting operations, and its insurance portfolio has been put into runoff. A.M. Best believes this decision will allow Arig to focus its strategy on its core segments and higher margin business lines improving underwriting profitability. Whilst year-to-September 2015 results show a moderate improvement in underwriting performance, the company has recorded overall losses for the period, driven by significantly lower investment returns.
In accordance with Regulation (EC) No. 1060/2009, the following is a link to required disclosures: A.M. Best Europe - Rating Services Limited Supplementary Disclosure. This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best's Ratings & Criteria Center.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
-Ends-
Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
© Press Release 2015
