A.M. Best Revises Outlook to Stable for Al Fajer Retakaful Insurance Company K.S.C. (Closed) [Professional Services Close – Up]

A.M. Best Europe - Rating Services Limited has revised the outlook to stable from negative and affirmed the financial strength rating of B++ (Good) and issuer credit rating of "bbb+" of Al Fajer Retakaful Insurance Company K.S.C. (Closed) (Al Fajer Re) (Kuwait).

The stable outlook reflects Al Fajer Re's improved underwriting and investment results, which reduces A.M. Best's concerns surrounding the company's historical volatile performance.

In the financial year ending 31 March 2013, Al Fajer Re reported a second year of successive profits in both its shareholders and policyholders' funds. In 2013, the company reported a surplus within its policyholders' fund of KD 0.4 million (USD 1.4 million) and a net profit within its shareholders' fund of KD 2.6 million (USD 9.2 million). Surplus within the policyholders' fund was driven by underwriting operations, which generated a combined ratio of 98.3 percent, and was used to pay down prior year deficits. Profit within the shareholders' fund benefitted from the reversal of prior year impairment provision and was retained in order to offset prior year accumulated losses.

Over the past two years-and in order to stabilise its level of profitability and risk-adjusted capitalisation-Al Fajer Re significantly improved its level of enterprise-wide risk management. Underwriting and investment losses during the company's early years of operation had a material impact on its level of risk-adjusted capitalisation. While currently at an adequate level, failure to generate stable operating results could place a strain on the company's level of risk-adjusted capitalisation.

Positive rating pressure may arise by the gradual development of Al Fajer Re's business profile over the medium to long term, while developing a good level of risk-adjusted capitalisation within its retakaful fund and maintaining a profitable underwriting and investment portfolio. There will be negative pressure on Al Fajer Re's ratings if it is unable to maintain risk-adjusted capitalisation at an adequate level or if profitability deteriorates.

More information:

ambest.com

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