The underwriting performance of Al Sagr Cooperative Insurance Company
improved in 1H2026, with a combined ratio of 100.9%, after a sharp deterioration in 2025 (combined ratio: 111.1%), Fitch Ratings said. This compares with strong underwriting performance in 2023 (96%) and 2024 (94%).
Al Sagr reported a marginal net profit of about SAR2.1m ($560,000) in 1H2026, helping annualised return on equity (ROE) recover to about 1.2% (2025: a loss of SAR70m and ROE of -18.9%). The 2025 deterioration was driven by industry-wide margin pressure and intense price competition. The temporary suspension of compulsory motor policy sales also weighed on premium growth.
Intense competition in Saudi Arabia's motor and medical insurance markets is a key risk for insurers. Fitch expects management's focus on repricing the motor portfolio and tighter risk selection in both motor and medical lines to help mitigate these pressures. However, Fitch also expects financial performance to remain under pressure throughout the rest of 2026, given Al Sagr's small market share and, consequently, its limited ability to influence pricing trends in the domestic market. Fitch expects the combined ratio to remain at about 100% in 2026 and to improve to just below 100% in 2027. It also expects ROE to stay modest, in the low single digits.
Outlook improved
Fitch has revised Al Sagr's outlook to ‘Stable’ from ‘Negative’ and affirmed Al Sagr's Insurer Financial Strength (IFS) Rating at 'BBB' and National Long-Term IFS Rating at 'A+(sau)'.
Fitch said that the outlook revision reflects Al Sagr's improving underwriting performance in 2026, in line with the market, and the company's continued implementation of remedial actions to address governance concerns raised by the Saudi Insurance Authority (IA), the country's regulator, in February 2025, enabling the resumption of compulsory motor business sales in 2H2025, which had been suspended earlier in the year.
The ratings continue to reflect Al Sagr's strong capitalisation and small size in the Saudi insurance market.
Aside from profitability, other key rating drivers for Al Sagr include:
Small Saudi insurer: Fitch's assessment of Al Sagr's company profile reflects its small operating scale and limited franchise. The insurer had a market share of less than 1% in Saudi Arabia at the end of 2025. Gross written premiums (GWP) decreased marginally to SAR592m in 2025 from SAR602m in 2024, as the temporary suspension of compulsory motor policy sales weighed on premium growth.
Fitch expects premium growth to remain moderate in 2026, as the company focuses on underwriting and pricing discipline. Al Sagr's IFS Rating is one notch below its 'BBB+' implied IFS Rating due to a negative adjustment for its company profile.
Al Sagr is reasonably diversified by product line, despite its small size. At end-2025, motor accounted for 50% of GWP, followed by medical (GWP: 44%) and property/casualty (GWP: 6%). The company has taken steps to strengthen its pricing and underwriting practices following a period of weak performance through 2022, which supports Fitch’s assessment of its business risk profile.
Progress in addressing governance concerns: Al Sagr has continued to make progress in addressing the corporate governance concerns raised by the IA, following the implementation of remedial actions that enabled the resumption of compulsory motor policy sales in June 2025. The IA had suspended such sales in early 2025, citing regulatory compliance and governance deficiencies. The suspension temporarily weighed on premium growth, although the insurer continued to service compulsory motor policies. Fitch does not expect the suspension to materially affect Al Sagr's franchise. The global credit rating agency expects Al Sagr to complete all remedial actions requested by the IA.
Strong capitalisation and leverage: Al Sagr's Prism Global score was unchanged at 'Extremely Strong' at end-2025, although it weakened within the category due to significant accumulated losses. Capitalisation improved significantly following a SAR160m rights issue in July 2024, which kept the company's local solvency ratio strong, although it declined to 210% at end-2025 from 272% at end-2024. The ratio remained strong at 207% at end-1Q2026, reflecting Al Sagr's robust capital base; Fitch expects the ratio to stay in line with the company's target of 200% over the medium term. Al Sagr's financial leverage ratio was zero at 30 June 2026, which supports Fitch’s 'Strong' assessment.
Limited impact from Iran War: Fitch expects the direct impact of the conflict in the Middle East to be limited, given Al Sagr's low exposure to business lines subject to war risk. However, a prolonged conflict may create broader macroeconomic challenges and hinder the company's ability to deliver a sustained turnaround in financial performance.