Gulf Insurance Group (GIG) chalks up consistently good operating profitability, driven by sound underwriting results, well-controlled expenses and steady investment income, noted Moody's Ratings (Moody's).
The global credit rating agency added, “GIG’s good reserve adequacy and moderate reserve risk are supported by its good technical expertise and risk management capabilities. These capabilities have also helped the group maintain strong capital adequacy that is resilient to stress, including the liquidity stress that followed the cancellation and liquidation of the AFYA health insurance programme for retired citizens, the residual risks of which the group continues to manage effectively.”
Moody's has affirmed the ‘A2’ insurance financial strength ratings (IFSRs) of GIG and its main Kuwait subsidiary, Gulf Insurance and Reinsurance Company (GIG Kuwait). The outlooks on both entities remain stable.
GIG is the operating holding company of a Kuwait-based group with operations across the Gulf Cooperation Council (GCC) and Middle East and North Africa (MENA) regions.
Ratings rationale
The affirmation of GIG's ‘A2’ IFSR reflects the group's leading market positions in Kuwait, through its subsidiary GIG Kuwait, and its presence in other GCC and MENA markets, which provides good business and geographic diversification. The rating also reflects GIG's consistently good operating profitability, driven by sound underwriting results, well-controlled expenses and steady investment income, and its good reserve adequacy and moderate reserve risk supported by its good technical expertise and risk management capabilities. These capabilities have also helped the group maintain strong capital adequacy that is resilient to stress, including the liquidity stress that followed the cancellation and liquidation of the AFYA health insurance programme for retired citizens, the residual risks of which the group continues to manage effectively.
However, GIG's rating is constrained by its exposure to MENA countries with more difficult operating environments and the associated downside risks, although this business represents a minority of the group's operations. Financial leverage remains relatively high compared to regional peers, although we expect it to decrease over time.
The affirmation of GIG Kuwait's ‘A2’ IFSR reflects the insurer's standalone credit profile and a high degree of support from its parent, GIG. Although the cancellation of the AFYA contract significantly reduced GIG Kuwait's premium volume, the company remains the largest insurer in Kuwait, GIG's lead operating subsidiary in the country and an integral part of the group. Accordingly, Moody’s expects GIG to remain supportive of GIG Kuwait and the ratings of the two entities to remain aligned.
Outlook
Moody’s said that the stable outlooks for GIG and GIG Kuwait reflect its expectation that the group will maintain its leading market position in Kuwait and its strong position in the wider region, along with good profitability, strong capital adequacy and liquidity buffers.