AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Al Ahleia Insurance Company S.A.K.P. (Al Ahleia) (Kuwait). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Al Ahleia’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Al Ahleia’s balance sheet strength is underpinned by risk-adjusted capitalisation, which, as measured by Best’s Capital Adequacy Ratio (BCAR), is at the strongest level, and good financial flexibility with no financial leverage. An offsetting factor is the company’s significant holdings in private equity and real estate funds, which expose its capital base to potential volatility. Al Ahleia’s dependence on reinsurance is moderate overall, as the high cession rate of the direct portfolio is diluted by significant retention of reinsurance business written by the company’s subsidiary, Kuwait Reinsurance Company K.C.S.P. (Kuwait Re).
Al Ahleia has a five-year average return on capital of 9.3%, supported by solid technical performance and positive, albeit volatile, investment earnings. The company’s direct insurance portfolio has a track record of excellent performance, helped by favourable inward reinsurance commissions. On a consolidated basis, technical margins are reduced by the lower profitability of reinsurance business underwritten by Kuwait Re, but remain robust, demonstrated by a combined ratio of 96.2% in 2018. Prospective consolidated earnings are expected to
reflect the continued excellent performance of Al Ahleia’s direct insurance operations, as well as the benefits of strategic decisions implemented by Kuwait Re to improve the profitability of its reinsurance portfolio.
Al Ahleia has an established position as a top four insurer in Kuwait’s direct market, with a particular good market share in the commercial segment. Its profile is enhanced by reinsurance arm, Kuwait Re, which provides international diversification through operations spanning the Middle East and North Africa, Asia-Pacific and Central and Eastern Europe. On a consolidated basis, the Al Ahleia group wrote gross premiums of KWD 84.0 million in 2018, with Kuwait Re contributing KWD 44.2 million.
Whilst Al Ahleia and Kuwait Re have in place risk management frameworks considered appropriate for their specific risk profiles, Al Ahleia is still developing a comprehensive group-wide ERM framework. As the group’s risk profile continues to develop, it will become increasingly important for Al Ahleia to enhance its ERM capabilities, particularly in areas such as capital management and market risk.
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