Oman Insurance Company (OIC), one of the UAE's biggest insurers, has a track record of strong operating performance, demonstrated by a 10-year (2011-2020) weighted return-on-equity (ROE) ratio of 8.2%, notes AM Best.
The global credit rating agency expects OIC's operating performance to remain strong prospectively, supported by disciplined underwriting and stable investment results.
The insurer reported a profit after tax of AED196.5m ($53.5m) for 2020, an increase of 3% from 2019, which translated to an ROE of 9.9%. Underwriting performance improved from 2019 with the company benefitting from the removal of certain loss-making accounts and increased retention of profitable business in line with its risk appetite.
The overall impact of the COVID-19 pandemic on OIC’s underwriting performance for 2020 was broadly neutral with favourable claims experience on the company’s motor line of business offset by higher claims in its medical portfolio.
OIC’s investment performance improved in 2020 with the company continuing to benefit from an increase in its free cash flows generated from the robust credit management strategy.
AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of OIC. The outlook of these credit ratings is stable.
Balance sheet strength
The ratings reflect OIC’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management, says the credit rating agency.
OIC’s balance sheet strength is underpinned by its strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects prospective BCAR scores to remain comfortably in excess of the minimum required for the strongest level assessment, as the company actively manages its capital position, ensuring its capital base supports its business plans.
The company’s balance sheet strength is supported by its conservative investment portfolio, excellent liquidity and prudent reserving practices. An offsetting factor is OIC’s high level of reinsurance dependence, albeit not as significant as other regional peers, with low retention across many lines of business. This is partially mitigated by a panel of reinsurers of high credit quality.
OIC has a market-leading position in the UAE, where it ranks as the third largest insurance company by GWP, notes AM Best. In 2020, the company’s gross premium revenue increased marginally to AED3.6bn (2019: AED3.5bn) despite challenging market conditions. Whilst OIC’s business continues to be concentrated in the UAE, it is well-diversified by line of business across the life and non-life segments. Geographic concentration in the UAE is expected to reduce slowly as the company prudently expands its international facultative business.