Best’s News & Research Service - March 31, 2022 12:19 PM (EDT)
AM Best Withdraws Credit Ratings of Noor Takaful Family PJSC
- March 31, 2022 12:19 PM (EDT)
London //BestWire// - AM Best has placed under review with developing implications the Financial Strength Rating (FSR) of B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bb” (Fair) of Noor Takaful Family PJSC (NTF) (United Arab Emirates). Concurrently, AM Best has withdrawn these Credit Ratings as the company has requested to no longer participate in AM Best’s interactive rating process.
The ratings reflect NTF’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management.
The company’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which was at the strongest level as at year-end 2020, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects NTF’s prospective risk-adjusted capitalisation to deteriorate over the short term, driven by increased underwriting risk arising from targeted business growth. The balance sheet strength assessment also considers NTF’s conservative investment portfolio and its appropriate reinsurance programme placed with a panel of financially sound reinsurance partners.
NTF has a track record of modest-but-positive operating performance, with a weighted average return-on-equity of 2.8% over the past five years (2016-2020). The company has benefited from a good balance of earnings between its family (life) and medical segments; nonetheless, technical performance has been volatile, with NTF posting an underwriting loss in three of the past five years.
NTF’s limited business profile assessment reflects its market position and portfolio concentration within the UAE’s medical and family takaful insurance market. The business combination with Dar Al Takaful PJSC (DAT) in 2020 has contributed to greater scale in the highly competitive UAE market, although NTF remains a mid-tier player.
These ratings have been placed under review with developing implications following the announcement on 3 March 2022 that DAT, NTF’s parent group, has reached an agreement with National Takaful Company (Watania) PJSC on a proposed merger between both companies. The transaction, which is subject to shareholder and regulatory approvals, is expected to complete during the third quarter of 2022. The under review with developing implications status reflects the potential impact of the merger on NTF’s prospective credit fundamentals, and the strategic direction and consolidated financial strength of its parent group, DAT.
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.