UAE: Takaful Re expected to build position over next two years - S&P
Source: Middle East Insurance Review | Mar 2015
Dubai-based Takaful Re (TRL) is expected to restore its premium and earnings over the next two years, with its risk-based capital remaining extremely strong, said Standard & Poor’s (S&P).
“We believe that TRL’s premium is likely to increase to around US$20-22 million (2014: $16 million) mainly through new business. We expect the company to generate an improved combined ratio (losses plus expenses) in 2015-2016 of close to 110%, with a return on equity of between 0.5%-2%. This is likely to result from better pricing and increased investment return reflecting the company’s new asset mix slightly geared toward equities and sukuk bonds,” said S&P.
“We are lowering our assessment of liquidity to strong from exceptional, mostly reflecting the new asset allocation. The amount of liquid assets remains well above total expected claims. We continue to consider the new portfolio conservative relative to the capital base,” it added.
There are some uncertainties associated with the 2015-17 forecast, but they are somewhat mitigated by the backing provided by TRL’s majority shareholder, Arab Insurance Group, said the international rating agency.
In the report, S&P noted that TRL saw a deterioration in its competitive position and underwriting performance, partly reflecting the challenges within the Islamic insurance sector in recent years. The rating agency said that it was revising its outlook on TRL to negative from stable while affirming its ‘BBB’ insurer financial strength and counterparty credit ratings on the company. The outlook revision follows TRL’s material reduction in premium and anticipated poor results in 2014, said S&P.