A.M. Best affirms ratings of Arab Orient Insurance Company

07/05/2011 00:00 AST

A.M. Best Europe - Rating Services Limited has affirmed the financial strength rating of A 'Excellent' and the issuer credit rating of 'a' of Arab Orient Insurance Company 'PSC' 'Orient' 'United Arab Emirates'. The outlook for both ratings remains stable.

Both ratings continue to be supported by the company's superior risk-adjusted capitalisation, excellent franchise within the UAE, conservative investment strategy and the consistently strong profitability.

Offsetting factors are the high level of reinsurance dependence and the geographic concentration of business within the UAE.

Orient has maintained its strong position in the UAE insurance market, ranking as the third-largest by gross written premium. Growth in premiums has been consistently sound and is expected to continue with the company leveraging off of its position within the Al-Futtaim Group.

Despite Orient's very strong capital position, it continues to post excellent returns on capital and surplus, which combined with high levels of profit retention, have and should continue to support internal capital generation. Furthermore, the company's particularly conservative investment strategy provides protection from market volatility and thus supports the stability of its earnings.

Whilst premium retention remains fairly low, with 70% ceded to reinsurers, Orient remains focused on underwriting, with technical profits driving net income. Furthermore, credit risks assumed are mitigated by the generally sound ratings of the company's panel of reinsurers.

Management have embarked upon a strategy of geographical diversification; however, in the short term, business is likely to remain concentrated in the UAE. Such concentration risk is mitigated by the low exposure to catastrophic events.

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: "Understanding Universal BCAR"; "Update to BCAR for Life & Health Insurers"; and "Assessing Country Risk".

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.

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