Saudi insurance firm Al-Etihad retains Moody's A3 rating with stable outlook

05/05/2025 01:50 AST

Saudi-based Al-Etihad Cooperative Insurance Co. has retained its A3 financial strength rating from Moody's, reflecting the firm's strong market position and disciplined underwriting.

Moody's cited several key strengths supporting the rating, including Al-Etihad's solid market position as the Kingdom's eighth-largest insurer, its conservative investment strategy - where high-risk assets represent just 28.2 percent of equity - and its strong capital adequacy.

The agency also highlighted the company's five-year average return on capital of 7.7 percent and a healthy combined ratio of 95.2 percent.

"However, these strengths are partially offset by Al-Etihad's concentration to the Saudi insurance market which has an elevated level of competition, as well as Al-Etihad's concentration to motor and medical insurance, which are the Saudi insurance market's most competitive lines of business," Moody's said.

This marks the second consecutive A3 rating for Al-Etihad since August, when Moody's initially assigned the grade, citing similar strengths such as asset quality and profitability. At the time, the agency emphasized the insurer's ability to navigate competitive pressures while maintaining financial resilience.

Al-Etihad, a mid-tier property and casualty insurer, offers a range of commercial and personal insurance products. The A3 rating places the company in the upper-medium grade category, indicating low credit risk and a strong capacity to meet its financial obligations. In its August update, Moody's also affirmed Al-Etihad's Governance Issuer Profile Score of G-2, reflecting its conservative risk management practices and experienced leadership.

The insurer's 2023 financial performance further strengthened its standing, with net profits surging 639 percent year-on-year to SR93.89 million ($25.02 million), driven by increased revenues in the motor insurance segment.

Looking ahead, Al-Etihad's ability to sustain profitability while effectively managing market risks will be critical to maintaining its current rating.

Moody's review did not incorporate explicit support from Al-Etihad's largest shareholder, Kuwait's Al Ahleia Insurance, but acknowledged governance benefits from the partnership. The agency's following assessment will evaluate any material changes in the company's credit profile.

For now, the stable outlook signals confidence in Al-Etihad's strategic direction, even as it faces sector-specific challenges in Saudi Arabia's evolving insurance landscape.

The Kingdom's insurance sector has experienced robust growth, with revenues surging 16.9 percent year on year in the third quarter of 2024, driven by strong demand for motor, medical, and property insurance.

According to a KPMG report, this expansion is fueled by Vision 2030-driven regulatory reforms, including mandatory health coverage and stricter auto insurance requirements.

The sector's net profit before zakat and tax jumped 25.9 percent to SR3.90 billion, while total assets grew 20 percent to SR84.91 billion, reflecting deepening market maturity.

The Insurance Authority's 2023 establishment and adoption of IFRS 17/9 standards have further strengthened governance and transparency.

With S&P Global projecting 10-15 percent revenue growth in 2025, the sector remains a key pillar of Saudi Arabia's economic diversification.