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Best’s News & Research Service - June 27, 2018 08:15 AM (EDT)

A.M. Best Revises Issuer Credit Rating Outlook to Positive for Orient Insurance PJSC

  • June 27, 2018 08:15 AM (EDT)
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London //BestWire// - A.M. Best has revised the outlook to positive from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICR of “a” of Orient Insurance PJSC (Orient) (United Arab Emirates). The outlook for the FSR remains stable.

The Credit Ratings (ratings) reflect Orient’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM). The revised Long-Term ICR outlook reflects the track record of consistently outperforming the market’s operating performance, which has been largely free of material fluctuations despite severe competition in the UAE market. A.M. Best expects Orient to execute its business plans successfully without compromising its risk-adjusted capitalisation and operating performance. The company’s ERM framework also is expected to further develop to support its growing business profile and emerging risks.

Orient’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, with Best’s Capital Adequacy Ratio (BCAR) scores comfortably above 50% at the 99.6% confidence level. The company’s balance sheet strength is supported by its prudent reserving practices and strong liquidity position. The majority of capital consumption arises from the company’s investment portfolio, which includes a material strategic equity holding that accounted for approximately 26.5% of total invested assets at year-end 2017. This investment created some volatility for Orient’s capital and surplus in 2016 and 2017, owing to fair value movements. However, Orient has sufficient capital buffers to absorb these fluctuations. Additionally, the company utilises risk mitigation tools to dilute the potential impact of a material adverse fair value movement.

Orient has a track record of strong operating performance, as evidenced by the exceptional five-year (2013-2017) weighted average combined ratio and return on equity of 73.5% and 12.3%, respectively. The company consistently has maintained best-in-market underwriting profits. In 2017, the company demonstrated that it can significantly grow its top line without compromising its underwriting results. A.M. Best expects that Orient’s prudent approach to risk selection and focus on profitability over top-line growth will support continued strong technical performance.

Orient’s solid business profile in the UAE, derived from the company’s strong brand and control over its distribution network, assisted the company in achieving a market leadership position in 2017, with gross premiums growing significantly by 50.4% to AED 4.0 billion. Orient’s growth benefited from the company being early innovators in the region in offering a fully digitalised platform for its insurance products. This allowed the company to capitalise on the roll-out of mandatory medical schemes in Dubai. Prospectively, premiums are not expected to grow at the same rates seen in 2017; however, meaningful growth is expected on the company’s life business. Orient’s business profile continues to benefit from its multichannel distribution network and affiliation with the Al-Futtaim group. A.M. Best expects Orient to increase its penetration within the UAE’s life segment and continue to develop its regional presence in line with the Al-Futtaim group’s expansion where feasible.

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 the world’s oldest and most authoritative insurance rating and information source.



Financial Strength Press Release A.M. Best Rating Services, Inc. Insurance Issuer Credit Rating Best's Credit Rating Action Rating Event


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