AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a+” (Excellent) of Orient Insurance PJSC (Orient) (United Arab Emirates) and its subsidiaries, Orient Takaful Insurance Company (S.A.E.) (Orient Takaful) (Egypt) and Orient Takaful PJSC (UAE). The outlook of these Credit Ratings (ratings) is stable. These companies collectively are referred to as Orient or the group.
The ratings reflect Orient’s balance sheet strength, which AM Best assesses as very strong, as well as its very strong operating performance, neutral business profile and appropriate enterprise risk management.
Orient’s balance sheet strength is underpinned by its consolidated risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The group’s balance sheet strength is supported by prudent reserving practices and strong liquidity position. The majority of capital consumption in the BCAR model arises from the group’s investment portfolio, which includes a material strategic equity holding that accounted for approximately 18% of total invested assets at year-end 2022 and introduces potential volatility in Orient’s capital and surplus, owing to fair value movements. However, AM Best notes Orient’s capital buffers to date have been sufficient to absorb these fluctuations. The company’s remaining invested asset portfolio is relatively conservative, with a weighting toward cash and fixed-term bank deposits.
The group has a track record of very strong underwriting and operating profitability, which has been largely free of material volatility despite competitive conditions in the UAE market. This is evidenced by Orient’s excellent five-year (2018-2022) weighted average non-life combined ratio and return on equity of 79.1% and 13.7%, respectively (as calculated by AM Best). In 2022, Orient reported technical profits of AED 313.0 million (2021: AED 276.9 million), with the improvement driven by strengthened non-life performance, equating to a combined ratio of 78.4% (2021: 80.7%). AM Best expects that Orient’s prudent approach to risk selection and focus on profitability over top-line growth will sustain its very strong technical performance over the medium term.
Orient’s business profile assessment reflects the group’s leading market position in the UAE, where it ranked as the largest insurer by gross written premium (GWP) and net income. The company’s profile also reflects its strong brand and multichannel distribution network, as well as the affiliation with the Al-Futtaim group. An offsetting factor is Orient’s geographical concentration to the UAE, where approximately 90% of GWP is generated, although the group continues to develop its regional presence in select markets.
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Todor Kitin, ACA
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Associate Director, Analytics
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