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DOHA: Moody’s Investors Service has assigned a Baa2 insurance financial strength rating (IFSR) to the Qatar Islamic Insurance Company (QIIC). The rating outlook is stable, Moody’s announced in London yesterday.
QIIC provides both life and non-life insurance to individuals and businesses in Qatar with gross contributions of QR210MM in 2011 ($57.0MM) and total assets of QR579MM ($173MM).
Although privately owned, QIIC is an important insurer in Qatar, with the principal owner and Chairman of the board being Sheikh Thani bin Abdullah Al Thani,.
QIIC is run on the Al Wakala Islamic insurance model, which maintains separate funds for policyholders and shareholders.
Moody’s notes that QIIC’s rating reflects both the stand-alone fundamentals as well as incorporating the benefits the company derives from its shareholders.
Moody’s notes the main standalone strengths of QIIC are its extremely strong capitalisation in relation to insurance risk, and the strong profitability at both the underwriting level and the bottom line.
Moody’s notes the main challenges are to manage the significant investment risk, as QIIC invests predominantly in Qatari equity and property markets, with QIIC investing a further QR80.6m in real estate inH1 2012, the overall level of exposure to Qatar both through insurance and investment risk, and to diversify the portfolio away from its current focus on motor.
Moody’s added that upward rating pressure may evolve over time from a significant reduction in investment risk, either through wider asset classes or geographic exposure, and through sustained profitable growth and international expansion into markets of similar standing, thus reducing concentration risks.
On the other hand, the rating may experience downward pressure from significant further investments into the property or equity market, which would increase asset risk and (in the case of property) weaken the liquidity position of QIIC, reduced underwriting profitability with QIIC consistently reporting combined ratios in excess of 100 percent, and any significant increase in leverage—although Moody’s does not currently expect this to happen.
At first half 2012, QIIC recorded a 10 percent decline in gross contributions to QR108MM from QR120MM at H1 2011, largely driven by lower volumes of motor business.
Total policyholder surplus generated decreased by 14 percent to QR8MM from QR9MM, although shareholder profits increased four percent to QR35MM (First Half 2011: QR33MM). Total policyholders surplus and shareholders equity stood at QR 413MM (YE 2011: QR410MM).