Best’s News & Research Service - September 07, 2018 09:08 AM (EDT)
A.M. Best Affirms Credit Ratings of Union Insurance Company P.J.S.C.
- September 07, 2018 09:08 AM (EDT)
London //BestWire// - A.M. Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” of Union Insurance Company P.J.S.C. (Union) (United Arab Emirates). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Union’s balance sheet strength, which A.M. Best categorises as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
Union’s balance sheet strength is underpinned by risk-adjusted capitalization that A.M. Best expects to be maintained at the strongest level, partly supported by the company’s continued actions to de-risk its investment portfolio. Additionally, Union has increased its reinsurance utilisation resulting in lower net underwriting leverage. The combination of these measures are also expected to allow Union to meet its local solvency requirements. An offsetting rating factor is the company’s higher reinsurance dependency, which is factored in the overall balance sheet strength assessment of strong.
The company reported a sound pre-tax operating profit of AED 9 million for the first six months of 2018, with a good technical profit offset by a loss from investment activities. Prospective earnings volatility is expected to be dampened by a continued shift to less volatile investment asset classes. Over the medium term, A.M. Best expects the company to benefit from a material increase in reinsurance commission income that should soften the loss of income from an increase in premium cessions to the reinsurance market.
Union’s domestic market share has grown noticeably over the past three years, based on gross written premiums, driven by strong growth in its life and medical book. The company’s growth benefits from its innovative approach to product development. Prospective premium growth is likely to be more moderate relative to the company’s compounded average growth rates of approximately 30% over the past five years (2013-2017), reflecting a larger emphasis on profitable underwriting. Although new business has been profitable to date, A.M. Best believes competitive market conditions in the UAE will challenge prospective profitability.
This press release relates to Credit Ratings 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 see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry.