Riyadh – Moody’s Investors Service (Moody’s) has affirmed the “Baa2” insurance financial strength rating (IFSR) of Buruj Cooperative Insurance Company (Buruj) with a stable outlook.
The rating reflects Buruj’s improved capital adequacy and maintained profitability but also intense competitive pressures of the Saudi insurance market, according to the company’s filing to the Saudi Stock Exchange (Tadawul) on Wednesday.
The affirmation of the rating also reflects Buruj’s sustained strong profitability, both in terms of underwriting profit and bottom line, with a 5-year average combined ratio.
It also shows the continued improvement in capitalisation, resulting from organic growth in consolidated equity (shareholders' and policyholders') of 13% to SAR 456.5 million ($121.7 million) in 2018 from SAR 403.8 million ($107.6 million) in 2017.
According to Moody’s report, Buruj’s new rating reflects its maintained strong asset quality, with the vast majority of investments held as cash, bank deposits and investment-grade Islamic sukuk bonds, translating into a low ratio of high-risk assets (HRA) as a percentage of consolidated equity (37.5% in 2018).
“The change in outlook to stable from positive reflects the intensified competitive pressures that Buruj faces in the Saudi insurance market,” the rating agency said.
The stable outlook reflects Moody’s expectation that Buruj will maintain its profitability and capital adequacy levels, but also the challenges for Buruj to regain and maintain its top 20 mid-market position given the high level of competition currently prevailing in the Saudi market.
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