London April 27 (BestWire) — A.M. Best Co. has assigned a financial strength rating of A (Excellent) and an issuer credit rating of “a” to Arab Orient Insurance Company (PSC) (Orient) (United Arab Emirates). The outlook for both ratings is stable.

 

The ratings reflect Orient’s superior risk-adjusted capitalisation, strong business position in the United Arab Emirates (UAE) insurance market and very good profitability. Offsetting factors are the geographic concentration risk and the high level of retrocession.

 

In A.M. Best’s opinion, Orient has a superior risk-adjusted capitalisation, which is supportive of the current business and the projected growth in the next two years. The historically high level of profits retention has enabled the company to consistently increase its capital base, and A.M. Best expects Orient to keep this approach going forward, further strengthening its risk-adjusted capitalisation.

 

Orient has developed a strong multichannel distribution network and experienced a solid business growth in recent years (the premiums’ compound annual growth rate has been in the range of 25% over the last five years), becoming one of the leading insurers in the UAE and reporting gross written premiums of AED 1 billion (USD 273 million) in 2009. At the same time, the profitability of the company has remained very good, a result of the excellent technical performance (combined ratio was below 60% in 2009) and the regular income from the financial assets portfolio.

 

Orient’s business is originated almost entirely from the UAE, which exposes the company to concentration risk. A.M. Best acknowledges Orient’s commitment to expand in other Middle Eastern and North African countries as a positive step, which can be smoothed by the presence of the parent group (Al-Futtaim) in the targeted markets.

 

Orient cedes approximately 70% of its premiums. The company has developed a mutual satisfactory relationship with a broad panel of reinsurers, mainly leading global companies that are highly rated. Despite Orient’s retention ratio being low when compared to other major insurers in the region, in A.M. Best’s view, the company remains focused on underwriting activity, whilst implementing a prudent investment strategy with financial assets mainly invested in short-term deposits at secure-rated banks.

 

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit

http://www.ambest.com/ratings.

 

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at

http://www.ambest.com/ratings/methodology.

BN-NJ-04-27-2010 1201 ET #