The Orient group has a track record of consistently outperforming its peers in terms of underwriting and overall profitability, which has been largely free of material fluctuations despite severe competition and regulatory changes in the UAE market, notes AM Best.
The international credit rating agency has affirmed the Financial Strength Rating (FSR) of “A” (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” (Excellent) of Orient Insurance (Orient) (UAE), and Orient Takaful Insurance Company (Orient Takaful) (Egypt), a subsidiary of Orient. The outlook of these credit ratings is stable. Concurrently, AM Best has assigned an FSR of “A” (Excellent) and a Long-Term ICR of “a+” (Excellent) to Orient UNB Takaful (UAE), also a subsidiary of Orient. The outlook assigned to these ratings is stable.
Commenting on the ratings, Mr Omer Elamin, Group President, Orient, said, “We are really thrilled and excited by this achievement. We are very proud to be recognised and appreciated by AM Best, the leading insurance rating agency. Orient Group has now three companies enjoying such high ratings. In the UAE the parent company has the highest rating from AM Best in the GCC and the Middle East. In Egypt, Orient Takaful has the highest rating in the country and in Africa. Orient UNB Takaful has now been assigned the same rating of the two companies which is an FSR of “A” (Excellent) and the long-term issuer credit rating (long term ICR) of a+ (Excellent). This will make Orient UNB Takaful the highest-rated takaful company in the region. This will also provide big support to the company to capture a higher market share in the takaful segment.”
AM Best says that Orient continues to demonstrate very strong operating performance, as evidenced by the excellent five-year (2016-2020) weighted average combined ratio and return on equity of 78.0% and 13.7% (as calculated by AM Best), respectively. In 2020, Orient reported a technical profit of AED259.8m ($70.7m), equating to a combined ratio of 75.8%. AM Best expects that Orient’s prudent approach to risk selection and focus on profitability over top-line growth will support continued strong technical performance.
Balance sheet strength
The ratings reflect Orient’s balance sheet strength, which AM Best assesses as very strong, as well as its very strong operating performance, neutral business profile and appropriate enterprise risk management.
Orient’s balance sheet strength is underpinned by its risk-adjusted capitalisation at the strongest level, with Best’s Capital Adequacy Ratio (BCAR) scores comfortably above 70% at the 99.6% value-at-risk confidence level. The group’s balance sheet strength is supported by its prudent reserving practices and strong liquidity position. The majority of capital consumption arises from the group’s investment portfolio, which includes a material strategic equity holding that accounted for approximately 19% of total invested assets at year-end 2020. The investment continues to create some volatility in Orient’s capital and surplus, owing to fair value movements. However, Orient’s capital buffers to date have been sufficient to absorb these fluctuations. In 2020, Orient diversified its investment portfolio further by asset class with an increase in fixed-income securities.
Leading market position
Orient’s solid business profile in the UAE, derived from its strong brand and control over its distribution network, assisted the group in maintaining a leading market position. Orient’s business profile continues to benefit from its multichannel distribution network and affiliation with the Al-Futtaim group.
AM Best expects Orient to increase its penetration in the UAE’s life insurance and non-life retail segments and continue to develop its regional presence in line with the Al-Futtaim group’s expansion where feasible.
AM Best expects the group also to benefit from access to the growing takaful insurance markets in the UAE and Egypt through its takaful subsidiaries.