Kuwait Insurance Company (KIC) has shown strong operating performance as is demonstrated by a five-year (2017-2021) weighted average return-on-equity ratio of 10.9%, and is driven by the company’s solid technical results, according to AM Best.
Non-life underwriting profitability has been strong, with combined ratios below 90% in each of the past five years, and growing life operations have positively contributed to earnings since 2018.
Investment performance supports overall earnings with a five-year (2017-2021) net investment return (excluding gains and losses) of 3.5%. However, KIC’s investment returns remain subject to volatility from regional equity market performance.
KIC holds a well-established position within its domestic insurance market of Kuwait, from which it sources all its premiums. In 2021, KIC generated GWP of KWD46.9m ($155.4m), compared with KWD38.1m in 2020. The company has good product diversification, offering a comprehensive range of non-life, life and takaful products, and maintains a strong presence in corporate business lines, including general accident and property, said the rating agency.
AM Best has affirmed KIC’s Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of ‘A-‘ (Excellent). The outlook of these credit ratings is ‘Stable’.
The ratings reflect KIC’s balance sheet strength, which AM Best assessed as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
KIC’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio. Further supporting the balance sheet strength assessment is KIC’s consistent internal capital generation and prudent reserving practices.
Offsetting factors include the company’s high-risk investment strategy with a concentration to equity holdings, which exposes its capital position to potential volatility, and the company’s elevated dependence on reinsurance, although the associated counterparty risk is partially mitigated by the use of a panel of financially sound reinsurers.
KIC’s near-term business plan includes geographic expansion and establishing operations in Egypt’s life insurance market. Although projected to be at a small scale relative to its domestic business, KIC’s regional expansion presents operational and execution risks, the agency said. M