DOHA: As a result of continued strong performance of Qatar Islamic Insurance Company (QIIC), international ratings agency Moody’s yesterday affirmed the Baa2 insurance financial strength rating (IFSR) of QIIC, and changed the outlook of the Qatar’s second largest insurer from ‘Stable’ to ‘Positive’ (rated Baa3 IFS), said a press statement.
The QIIC was one of the first Islamic insurers to be established worldwide. However, Moody’s noted that the insurer continues to be exposed to investment risk, to a reducing extent, due to significant investment in the Qatari equity and property markets.
Operating exclusively in Qatar, QIIC provides both life and non-life insurance to individuals and businesses in Qatar with gross contributions of QR212m in 2013 ($58m) and total assets of QR741m ($203m), and operates as the 6th largest insurer in the Qatari insurance market (2nd largest in Takaful only).
Moody’s said that its positive outlook for QIIC’s rating reflects the company’s improving and extremely strong capitalisation in relation to insurance risk (with the 2013 consolidated equity increasing by QR40m to QR450m since 2011 and maintaining a Gross Underwriting Leverage of 0.7x), and its sustained strong profitability at both the underwriting level (relative to peers in the Middle East) and the bottom line (with a Moody’s basis five year average Return on Capital of 16.8 percent and a five year average Combined Ratio of 68.9 percent as of 2013).
Nonetheless, Moody’s added that QIIC maintains a significant albeit reducing level of investment risk, as QIIC invests predominantly in Qatari equity and property markets (translating to the 2013 high risk assets, Moody’s basis, being equal to 95.2 percent of consolidated equity compared to 100.8 percent as at 2011), and that its insurance risk remains relatively concentrated to Qatar and to motor insurance (46 percent of contributions in 2013, down from 59 percent as at 2011), both of which may constrain the company’s ratings over time.