LONDON, Thursday, December 23rd 2010 [ME NewsWire]:
(BUSINESS WIRE)-- A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of “bbb+” of Qatar General Insurance and Reinsurance Company S.A.Q. (QGIR) (Qatar). The outlook remains positive.
The ratings of QGIR reflect its very strong risk-adjusted capitalisation, the strong, albeit challenged, business position in the Qatari insurance market, as well as the sound track record of profitability reported over the years. An offsetting factor is the high concentration of equities and real estate in the investment portfolio.
In A.M. Best’s opinion, QGIR’s risk-adjusted capitalisation is very strong and supportive of its business over the next two years. A.M. Best sees the company’s risk profile affected by the large concentration of assets in real estate and equity investments (primarily equities listed on the Qatar Stock Exchange). These two asset classes are the main drivers of QGIR’s required capital from a risk-adjusted perspective, and A.M. Best expects QGIR to move toward a more balanced investment portfolio.
QGIR maintains its position as the second-largest insurer within the Qatari insurance market, despite the company significantly reducing the size of business written in recent years. Between 2007 and 2009, QGIR’s accounted gross written premiums decreased by 38% and net written premiums by 11%, mainly as a result of the decreasing amount of the highly reinsured energy business. In addition, QGIR is focusing on improving the profitability within the motor segment, the main contributor to the technical result, which resulted in lower sales during 2009 also in this primary line of business.
Nevertheless, A.M. Best acknowledges that the different product mix is not detrimental to the company’s profile, which is increasing its retention ratio. Moreover, A.M. Best views positively the growing business of the takaful subsidiary, General Takaful Company. In terms of profitability, QGIR has a solid track record of good performance, both technical and non technical. Despite lower volumes of ceded business in recent years having implied a lower amount of inward commissions and negatively affecting the expense ratio, A.M. Best still expects QGIR to report a good combined ratio in the range of 90% at the end of 2010.
Separate from the insurance business, QGIR is developing some major real estate projects in Qatar, which are planned to be completed within the next two to three years. The project requiring the greatest contribution of QGIR is the World Trade Center, a 55-floor tower dedicated to international business, located at Doha Corniche. The estimated total development cost amounts to QAR 680 million (USD 187 million), which QGIR has already secured through a mixture of capital (land contribution plus cash) and debt funding.
A.M. Best recognises that QGIR’s level of capitalisation is currently able to absorb the exposure to these large scale projects. Nevertheless, in A.M. Best’s view, there is a low but material possibility that the extensive real estate exposure could put downward pressure on the company’s risk-adjusted capitalisation in the medium to long term.
The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilised include: “Risk Management and the Rating Process for Insurance Companies” and “Understanding BCAR for Property/Casualty Insurers”. Methodologies 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. Best Company. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2010 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
For media enquiries, please contact:
A.M. Best Europe
Lelio Lapresa, +(44) 20-7626-6264
Senior Financial Analyst
lelio.lapresa@ambest.com
Carlos Wong-Fupuy, +(44) 20-7626-6264
Assistant General Manager
carlos.wong-fupuy@ambest.com
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
Jim Peavy, +(1) 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.pea
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