Kuwait: Kuwait Re's underwriting performance boosts operating results
Source: Middle East Insurance Review | Jul 2023
Kuwait Re’s technical results in recent years have outperformed historic averages, with increases in earned premium and continued robust loss ratio experience contributing to a combined ratio of 92.3% in both 2021 and 2022 according to AM Best.
The credit rating agency said that Kuwait Re has a track record of adequate operating performance. In 2022, the company reported a net income of KWD8m ($26m), compared to KWD6.3m in 2021, which was equally generated by technical and non-technical operations.
The reinsurer’s operating performance has trended positively in recent years and results for 2022 translated to a return-on-equity of 12.0% (2021: 10.5%), compared with the five-year (2018-2022) weighted average of 9.9%. Enhanced underwriting selection and discipline have resulted in solid underwriting performance with the company reporting a five-year (2018-2022) weighted average combined ratio of 94.8%.
Kuwait Re’s balance sheet strength is underpinned by its risk-adjusted capitalisation, which is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR).
Capital consumption under BCAR is predominantly driven by underwriting risks, due to the company’s high premium retention and generally conservative investment allocation. The company’s balance sheet strength is supported by a track record of internal capital generation, along with prudent reserving practices and sufficient liquidity to support operations.
Partially offsetting factors include Kuwait Re’s holding of higher risk investments, including real estate, equating to approximately 14% of its total invested assets at year-end 2022, which exposes its capital base to potential volatility. M