LONDON: Insurance sector rating agency AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” with stable outlook to Kuwait Insurance Company.
The ratings reflect KIC’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
KIC’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR).
Further support to the balance sheet assessment stems from KIC’s demonstrated internal capital generation, through the retention of earnings, and prudent reserving practices.
Offsetting factors include KIC’s high-risk investment strategy, with regional equities accounting for a significant proportion of total assets, which heightens the potential volatility of the company’s capital position.
In addition, KIC’s dependence on reinsurance is considered elevated, although the associated counterparty risk is partially mitigated by the use of a reinsurance panel of strong credit quality.
KIC’s strong operating performance, evidenced by a five-year average (2014-2018) return on equity of 8.4%, is driven by the company’s solid technical results.
Non-life underwriting profitability has been solid, with combined ratios below 85% in each of the past five years, and life operations have been a positive contributor to earnings, albeit moderate. Investment performance provides a significant and largely positive contribution to earnings with a five-year (2014-2018) net investment return (excluding gains and losses) of 3.7%.
However, investment returns remain subject to volatility from regional equity market performance.
KIC holds a well-established position within its domestic insurance market, from which it sources all premium. The company has good product diversification, offering a comprehensive range of non-life, life and takaful products, and maintains a strong presence in corporate business lines including general accident and property.
In 2018, KIC wrote gross written premiums of KD 36.3 million (2017: KD 37.8 million). The business profile assessment remains constrained by the company’s geographical concentration and modest scale by international standards.