A.M. Best affirms Ratings of National General Insurance Company

05/05/2013 15:10 AST

A.M. Best Europe - Rating Services Limited has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of 'bbb+' of National General Insurance Company (P.S.C.) (NGI) (United Arab Emirates).

The outlook for both ratings is stable.

The ratings reflect NGI's strong risk-adjusted capitalisation, good track record of overall profitability and established domestic franchise.

An offsetting rating factor is NGI's developing level of enterprise risk management (ERM).

NGI's prospective risk-adjusted capitalisation is likely to remain strong. The company is expected to maintain a good balance between earnings retention and profit distribution, supporting its projected business growth over the near term.

NGI's capital requirement is driven by its investment profile, which is concentrated in equities and real estate. At present, risk-adjusted capitalisation is sufficient to absorb potential volatility in these higher risk assets. NGI has demonstrated a good track record of generating profits with return on capital and surplus averaging 12% in the last five years.

In 2012, overall earnings rebounded to Dhs46m ($13m), in line with NGI's historical performance. NGI's net income is supported by a good level of technical profitability across most business segments, returning a healthy combined ratio of 91% in 2012. Additionally, NGI's investment yield stabilised in recent years at 1.5% (when excluding realised and unrealised gains).

NGI is the seventh-largest insurance company in the UAE on a gross written premium basis, with most of its business generated locally. NGI's premium revenue is well diversified on a gross basis and skewed towards motor, medical and life businesses on a net basis.

Furthermore, NGI retains 67% of its overall premium revenue, one of the highest retention levels in the market. The company started developing a risk management framework in 2010. However, A.M. Best perceives current risk management to be marginal in relation to its risk profile.

Additionally, A.M. Best will monitor NGI's reserve position going forward, given that its net loss reserve to net written premium ratio has decreased to its lowest level in 2012. Going forward, negative rating pressure could result from a deterioration in NGI's overall performance or material weakening in its risk-adjusted capitalisation.

Upward movement is likely to emanate from a developed and integrated ERM framework. 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. 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. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.

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