LONDON–(BUSINESS WIRE)–AM Best Affirmed Al-Sagr National Insurance Company PSC (ASNIC) Financial Strength Rating of B (Fair) and Issuer Long-Term Credit Rating of “bb” (Fair) (UAE) . The outlook for these credit ratings (ratings) is negative. Concurrently, AM Best withdrew the ratings as the company requested to no longer participate in AM Best’s interactive ratings process.
The ratings reflect ASNIC’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and marginal management of business risks.
The negative outlook reflects the potential for further weakening of balance sheet strength measures, due to the potential for underwriting and/or investment losses.
The proper assessment of the strength of the company’s balance sheet takes into account the erosion of ASNIC’s capital base in 2021 due to a net loss of AED62.9 million, which follows the decline of its capital position in 2019 and 2020. ASNIC’s solvency coverage ratio is expected to be only slightly above its regulatory level. the capital requirement at the end of 2021. The company’s risk-adjusted capitalization, as measured by Best’s capital adequacy ratio (BCAR), is expected to be at the high level at the end of the year. year 2021. The balance sheet strength assessment also takes into account ASNIC’s increased financial leverage due to its overdraft increasing by AED107.2 million to reach AED154.6 million at the end of 2021; ASNIC needed the support of its overdraft facilities to manage the high claims experience. Additionally, the company’s investment portfolio has a high concentration of volatile real estate assets and domestic stocks.
ASNIC has a track record of adequate operational performance over the past few years, as evidenced by a five-year (2017-2021) average combined ratio of 99.0%, as calculated by AM Best. However, volatile investment results and high financial costs related to servicing the overdraft facility weighed on overall earnings, and the company announced a five-year (2017-2021) average return on equity ratio of -1.2%. Operating results deteriorated significantly in 2021, with the company reporting a net loss of AED62.9 million for the year, due to underwriting losses on automotive business and a share of net losses from an associated company, Al Sagr Co-operative Insurance Co.
ASNIC has a modest business profile as a mid-tier insurer in its home market, generating a gross written premium of AED517.7 million in 2021. There is some product diversification, but the company is focusing mainly in the automotive and medical business sectors.
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