Kuwait Insurance Company's (KIC) strong operating performance, demonstrated by a five-year average (2015-2019) return-on-equity ratio of 8.4%, is driven by the company's solid technical results, notes AM Best in a report.
Non-life underwriting profitability has been strong, with combined ratios below 85% in each of the five years, and life operations have been a positive contributor to earnings, albeit moderate.
Investment performance provides a significant and largely positive contribution to earnings with a five-year (2015-2019) net investment return (excluding gains and losses) of 3.8%. However, investment returns remain subject to volatility from regional equity market performance.
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of KIC. The outlook of these credit ratings is stable.
The ratings reflect KIC’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
Balance sheet strength
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 support to the balance sheet strength assessment stems from KIC’s consistent internal capital generation and prudent reserving.
Offsetting factors include KIC’s high dependence on reinsurance, although the associated counterparty risk is partially mitigated by the use of a reinsurance panel of strong credit quality. In addition, KIC’s capital position is exposed to potential volatility through the company’s high-risk investment strategy, with GCC equities accounting for a significant proportion of total assets.
KIC holds a well-established position within its domestic insurance market, from which it sources all premiums. 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.
In 2019, KIC generated gross written premiums of KWD37.6m ($124.1m), compared with KWD36.3m in 2018. The business profile assessment remains constrained by the company’s geographic concentration and modest scale by international standards.