Abu Dhabi - Mubasher: Moody's Investors Service on Monday affirmed the A3 insurance financial strength rating (IFSR) of UAE-based Al-Ain Ahlia Insurance Co. (AAAIC) and changed the outlook to negative from stable.
Moody's has affirmed AAAIC’s A3 IFSR, which reflects the company’s strong market position and brand, its positive technical experience in the oil and gas business lines added to its cooperation with other major international reinsurers, and its “strong underwriting profitability with a five-year average combined ratio of 93.5% in 2017,” Moody’s said in a statement.
In addition and in terms of profitability, despite suffering a large claim from ADNOC, AAAIC was able to report good results and profits on a net basis in the first half of 2018, whereas reinsurance repayments for its losses have been settled as planned by the company.
Abu Dhabi-listed AAAIC is the fourth largest UAE insurance firm in terms of premium by the end of2017, according to Moody’s.
Despite these positive attributes, Moody’s changed its outlook on the insurance firm to negative from stable, citing a significant rise in high-risk assets in the first six months of 2018 on the back of higher real estate exposure.
In the first half of 2018, AAAIC said that hotel development in the emirate of Dubai had been reclassified to investment properties from capital work in progress, which Moody’s said significantly increased AAAIC’s property investment portfolio to AED 965 million as at H1-18 from AED 152 million as at year-end 2017.
“As a result the overall real estate exposure has increased to around 59% of invested assets as at H1-18 from around 20% as at year-end 2017, well in excess of the 30% threshold allowed by the local regulator, likely resulting in a negative impact on the regulatory solvency capital of the company,” the investor service agency said.
Moody’s also said that AAAIC’s concentration “to this single property investment equated to around 50% of invested assets as at H1-18.”
