LONDON–(COMMERCIAL THREAD) –AM Best confirmed the financial strength rating (FSR) of A (excellent) and the long-term issuer credit ratings (long-term ICR) of “a +” (excellent) of Orient Insurance PJSC (Orient) (Arab Emirates) United) and Orient Takaful Insurance Company (SAE) (Orient Takaful) (Egypt), a subsidiary of Orient. The outlook for these credit ratings (ratings) is stable. At the same time, AM Best assigned an FSR of A (Excellent) and a long-term ICR of “a +” (Excellent) to Orient UNB Takaful PJSC (United Arab Emirates), a subsidiary of Orient. The outlook attributed to these ratings is stable.
The ratings reflect the strength of Orient’s balance sheet, which AM Best considers very strong, as well as its very good operational performance, neutral business profile and appropriate management of corporate risks.
Orient’s balance sheet strength is underpinned by its highest level risk-adjusted capitalization, with Best’s capital adequacy ratio (BCAR) well above 70% at the 99.6% confidence level of the Bank. value at risk. The strength of the group’s balance sheet is supported by its prudent provisioning practices and its strong liquidity position. Most of the capital consumption comes from the group’s investment portfolio, which includes a significant strategic stake which represented around 19% of total invested assets at the end of 2020. The investment continues to create some volatility in the capital and surplus Orient, due to changes in fair value. However, the Eastern capital cushions to date have been sufficient to absorb these fluctuations. In 2020, Orient further diversified its investment portfolio by asset class with an increase in fixed income securities.
The group has consistently outperformed its peers in terms of underwriting and overall profitability, which has been largely free from significant fluctuations despite severe competition and regulatory changes in the UAE market. Orient continues to deliver strong operating performance as evidenced by the excellent five-year weighted average combined ratio (2016-2020) and return on equity of 78.0% and 13.7% (calculated by AM Best ), respectively. In 2020, Orient reported an underwriting profit of AED259.8million, a combined ratio of 75.8%. AM Best expects that Orient’s conservative approach to risk selection and its focus on profitability rather than revenue growth will support continued strong technical performance.
Orient’s strong business profile in the United Arab Emirates, derived from its strong brand and control of its distribution network, has helped the group maintain a leading position in the market. Orient’s business profile continues to benefit from its multi-channel distribution network and affiliation with the Al-Futtaim group. AM Best expects Orient to increase its penetration in the life insurance and non-life retail segments in the UAE and continue to develop its regional presence in line with the group’s expansion. Al-Futtaim when possible. AM Best expects the group to also benefit from access to the growing takaful insurance markets in the United Arab Emirates and Egypt through its takaful subsidiaries.
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