LONDON: AM Best has assigned a Financial Strength Rating of B+ (Good) and a Long-Term Issuer Credit Rating of “bbb-” to Insurance House P.S.C.. The outlook assigned to these ratings is stable.

The ratings reflect IH’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).

IH’s balance sheet strength is underpinned by the company’s risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). In addition, the company has a panel of financially strong reinsurers and a good level of liquidity.

In 2019, IH was the first company in the UAE to issue perpetual subordinated bonds, increasing its regulatory capital base by AED 15 million (approximately USD 4.1 million) to bring it in line with all local solvency requirements. Offsetting factors include the company’s small overall capital base and material exposure to higher risk asset classes.

IH’s historical operating performance has been volatile due to material underwriting losses. However, following a change in senior management in 2016, IH embarked on strategic initiatives to stabilise its operations, adopting stricter underwriting controls and tighter claims management. Successful execution of these remedial measures has supported a reduction in the combined ratio over the past two years to 96.7% in 2018 (2016: 122.5%).

As a result, overall earnings also have improved considerably, reaching AED 10.6 million in 2018. Additionally, the company’s investment portfolio continues to contribute positively to the overall profitability, producing an investment yield (including gains) of 2.5% in 2018.

Results for the nine months to September 2019 demonstrate continued improvement in the company’s technical and overall profits.

IH holds a modest share of the UAE non-life market, writing AED 210.8 million in gross written premiums in 2018. In line with peers operating in the UAE, the company writes predominantly motor and medical insurance business. AM Best expects IH to continue to grow in line with its ambitious business plan, although market conditions remain challenging given the high level of competition.

AM Best views IH’s ERM as marginal. In recent months, the company has begun formalising its risk management framework, more closely aligning its controls and procedures to its risk profile. AM Best expects management to make meaningful enhancements to the ERM framework as it continues with its strategic transformation of the company.