LONDON–(BUSINESS WIRE)–AM Best has affirmed 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) (United Arab Emirates), and Orient Takaful Insurance Company (S.A.E.) (Orient Takaful) (Egypt), a subsidiary of Orient. The outlook of these Credit Ratings (ratings) is stable. Concurrently, AM Best has 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 assigned to these ratings is stable.
The ratings reflect Orient’s balance sheet strength, which AM Best assesses as very strong, as well as its very strong operating performance, neutral business profile and appropriate enterprise risk management.
Orient’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, with Best’s Capital Adequacy Ratio (BCAR) scores comfortably above 70% at the 99.6% value-at-risk confidence level. The group’s balance sheet strength is supported by its prudent reserving practices and strong liquidity position. The majority of capital consumption arises from the group’s investment portfolio, which includes a material strategic equity holding that accounted for approximately 19% of total invested assets at year-end 2020. The investment continues to create some volatility in Orient’s capital and surplus, owing to fair value movements. However, Orient’s capital buffers to date have been sufficient to absorb these fluctuations. In 2020, Orient has diversified its investment portfolio further by asset class with an increase in fixed-income securities.
The group has a track record of consistently outperforming its peers in terms of underwriting and overall profitability, which has been largely free of material fluctuations despite severe competition and regulatory changes in the UAE market. Orient continues to demonstrate very strong operating performance, as evidenced by the excellent five-year (2016-2020) weighted average combined ratio and return on equity of 78.0% and 13.7% (as calculated by AM Best), respectively. In 2020, Orient reported a technical profit of AED 259.8 million, equating to a combined ratio of 75.8%. AM Best expects that Orient’s prudent approach to risk selection and focus on profitability over top-line growth will support continued strong technical performance.
Orient’s solid business profile in the UAE, derived from its strong brand and control over its distribution network, assisted the group in maintaining a leading market position. Orient’s business profile continues to benefit from its multichannel distribution network and affiliation with the Al-Futtaim group. AM Best expects Orient to increase its penetration in the UAE’s life insurance and non-life retail segments and continue to develop its regional presence in line with the Al-Futtaim group’s expansion where feasible. AM Best expects the group also to benefit from access to the growing takaful insurance markets in the UAE and Egypt through its takaful subsidiaries.
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