Abu Dhabi – Mubasher: Standard & Poor’s Ratings Services on Wednesday assigned its 'A-' long-term counterparty credit and insurer financial strength ratings to the UAE’s Emirates Insurance Co. (EIC) with a ‘Stable’ outlook.
“The ratings reflect our view of EIC's favourable competitive position owing to its track record of above-market underwriting performance and operational scale,” S&P said in a new report, adding that the insurer’s operating performance was strong, with a five-year combined ratio of 81%, supported by low volatility in its loss ratios.
S&P said it viewed both the company’s business risk profile and the industry risk in the UAE as satisfactory.
“We combine our satisfactory business risk profile and strong financial risk profile assessments to derive our anchor of 'a-'. Other rating factors, such as management and governance, enterprise risk management, and liquidity, are neutral to the rating,” S&P stated in its report.
The ratings agency said EIC has “extremely strong risk-based capital adequacy that is resilient to underwriting event stress as well as potential volatility from its investment portfolio.”
The insurer is expanding domestically and abroad through its international Dubai-based arm, which S&P views as introducing a measure of potential volatility to operating performance.
“We expect EIC to continue to outperform the market as a whole, aided by the control structures it has in place. EIC's capital base will be maintained by strong profitability through ongoing franchise growth, which we do not expect to be materially different from market norms,” the report stated.
S&P said it expects up to 10% annual rise for premium income, which is in line with market norms, with a combined ratio below 93% and net profits of no less than AED 90 million, representing a return on equity of above 7%.
Earlier on Wednesday, EIC, the fourth-largest listed insurer in the UAE, posted a 9.6% decline in its net profits for the first half of 2015 to AED 82.63 million ($22.5 million) compared to AED 89.4 million ($24.3 million) in H1-14.
Net profits for Q2 stood at AED 23.3 million, a drop of 42.3% from AED 40.4 million in Q2-14.
