Moody's: Financial results of Al-Ain Ahlia Insurance are consistent

04/12/2010 00:00 AST

Moody's says the nine month results published by Al-Ain Ahlia Insurance Company are consistent with the A3 insurance financial strength rating in its new report on Al-Ain Ahlia published today. The net underwriting profit of Dhs42.0m was double the Dhs21.4m recorded in the first nine months of 2009. Total profit for the period of Dhs32m was lower than in 2009 reflecting weaker investment income, but gross premiums of Dhs453m were stable.

Moody's A3 rating on Al-Ain Ahlia reflects Al Ain Ahlia's strong business position in the Abu Dhabi market as one of the principal state-owned insurance companies for large State commercial projects, its excellent capitalisation levels with gross underwriting leverage of 0.8x and robust reinsurance programme, somewhat offset by a higher risk investment strategy compared to typical Western insurers.

Al-Ain Ahlia has good technical proficiency, with a long history of oil & gas underwriting and co-operation with major international reinsurers and consistent underwriting profitability. However ,the focus on Abu Dhabi does create geographic concentration risk and increases its reliance on the economic performance of the Emirate.

The outlook on the rating is stable reflecting that Al-Ain Ahlia's position in the market should afford it the opportunity to take advantage of the economic stimulus provided by Government over the next few years.

The rating could be upgraded if there are improvements in the asset quality, with a greater focus on high quality bond investments and deposits, or wider geographic diversity, with a commanding position in the wider Emirates or elsewhere in the GCC. Conversely the rating could be downgraded if there is a weakened capital position with gross underwriting leverage increasing to 2.5x or lower quality reinsurance program, a deterioration in the underwriting performance, with combined ratios above 100% for several years or increased volatility between business lines or increased exposure to risky asset classes, such as equities or property.

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