A.M. Best Europe – Rating Services Limited has affirmed the
financial strength rating of A- (Excellent) and the issuer credit rating
of “a-” of Gulf Insurance Company K.S.C. (GIC) (Kuwait)and
its subsidiary, Gulf Life Insurance Company K.S.C. (Closed) (GLIC)
(Kuwait). The outlook for all ratings remains stable.
The ratings reflect GIC’s good regional business profile, good level of
overall profitability and supportive level of risk-adjusted
capitalisation. A partially offsetting factor includes the company’s
volatile investment performance in recent years.
Furthermore, the ratings of GLIC reflect a rating enhancement from GIC,
given the implicit support received, in addition to its sound business
profile within Kuwait and a good level of technical profitability.
GIC’s good business profile is demonstrated by its strong competitive
position within a number of countries in the Middle East North Africa
(MENA) region. In addition to GIC’s stand-alone and GLIC’s strong
position in Kuwait, a strong market position is also maintained in
Bahrain and Jordan via GIC’s subsidiaries, Bahrain Kuwait Insurance
Company B.S.C. and Arab Orient Insurance Company.
Additionally, in Egypt, GIC has a good market position through its
subsidiary, Arab Misr Insurance Group S.A.E. and through its
recently acquired subsidiary in Iraq, Dar Al Salaam Insurance Company.
Going forward, A.M. Best expects GIC to maintain a strong business
profile in the region, expanding through acquisitions and reinforcing
its position in its core markets.
Underwriting profits have remained strong in recent years and have been
the driver of pre-tax profits. In 2011, GIC reported underwriting
profits of KD 9.8 million (USD 35.4 million), an increase of 15%
compared to 2010, with the combined ratio remaining low at around 83%.
Profit before tax of KD 9.4 million (USD 33.7 million) in 2011 was 5%
lower than in the same period last year, but still strong as
demonstrated by GIC’s return over adjusted capital and surplus of 13.2%.
Furthermore, GLIC’s overall earnings totalled KD 1.2 million (USD 4.2
million) and represented 13% of the group’s total.
GIC’s level of risk-adjusted capitalisation is adequate. It benefits
from a group wide reinsurance program of good credit quality and a good
level of business leverage. In the first quarter of 2012, risk-adjusted
capitalisation has improved. As per a new risk management strategy, the
company has decided to de-risk part of its equity portfolio, reducing
the demand for capital. However, overall allocation of investments into
equities is still high and perceived to be the main source of a capital
Furthermore, GIC’s investment performance is prone to volatility given
its exposure to equities, real estate and funds in addition to the
exposure in foreign currencies. Unrealized and impaired losses totalled
KD 10 million (USD 36 million) in 2011, including losses through the
income statement and investment revaluation reserves. Prospectively,
investment performance is likely to continue to create volatility within
Upward rating movement could be driven by continued improvement in GIC’s
key metrics, including its risk-adjusted capitalisation, operating
performance and risk management.
A deterioration of GIC’s risk-adjusted capitalisation resulting from
either excessive growth given its expansion plans or a substantial
deterioration in its financial performance could add negative pressure
to the ratings.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Key criteria utilised include: “Risk
Management and the Rating Process for Insurance Companies”; “Assessing
Country Risk”; and “Understanding Universal BCAR.” Best’s Credit Rating
Methodology can be found at www.ambest.com/ratings/methodology.
In accordance with Regulation (EC) No. 1060/2009, the following is a
link to required disclosures: A.M.
Best Europe - Rating Services Limited Supplementary Disclosure.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M.
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