A.M. Best Affirms Ratings of Emirates Insurance Company P.S.C.

LONDON, 7 July 2016

A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Emirates Insurance Company P.S.C. (EIC) (United Arab Emirates). The outlook for each rating remains stable.

The ratings reflect EIC's strong risk-adjusted capitalisation, excellent business profile within the United Arab Emirates (UAE), and its track record of good technical and operating performance. An offsetting rating factor is the company's concentrated investment portfolio, which is weighted towards domestic equities.

EIC's risk-adjusted capitalisation remains at a very strong level. Capital consumption continues to be driven by investment risk, with UAE equity holdings accounting for 44% of the company's total investments as at year-end 2015. Despite EIC's concentrated investment portfolio, its capital position remains sufficient to absorb volatility driven by these equity holdings. This was demonstrated by the AED 102 million (USD 28 million) of unfavourable fair value movements from investments during 2015, recorded through other comprehensive income. In addition, EIC's strong risk-adjusted capitalisation benefits from relatively low underwriting risk. Whilst the company has a strong capital buffer to support future strategic initiatives, internal capital generation is expected to remain constrained by dividend payments.

EIC wrote AED 939 million (USD 256 million) of gross written premium in 2015, ranking as the UAE's fourth largest listed insurer. Whilst 77% of business is derived from the domestic market, the company has a well-diversified portfolio by line of business, and benefits from geographical diversification through business written by Emirates Insurance Company International (EIC Intl). EIC Intl is the company's specialty reinsurance branch operating out of the Dubai International Financial Centre, writing business from the Afro-Asian region. EIC Intl accounted for 23% of EIC's gross written premium during the first quarter of 2016.

EIC's technical performance remains good with a five-year average combined ratio of 84%. For 2015, the company achieved an overall operating profit of AED 90 million (USD 24 million), this translated into a sound return on equity of 9%. The company's profits are split equally between investment and underwriting operations, with net investment income totaling AED 42 million (USD 11 million) during 2015. EIC reported a good net profit of AED 38 million (USD 10 million) for the first quarter of 2016, albeit 35% down from the first quarter of 2015, as the company was hit by losses in Abu Dhabi and Chennai.

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