Standard & Poor’s Ratings Services affirmed ‘A’ counterparty credit and financial strength ratings on Qatar Insurance Co. S.A.Q. (QIC). The outlook is stable.
“The ratings reflect our view of QIC’s strong business risk profile and very strong financial risk profile. The combination of these factors results in an anchor of either a+ or a, according to our criteria. We have opted for the lower anchor given QIC’s still rapidly developing business model and franchises in the global reinsurance and London insurance markets, which we believe present some potential uncertainty. QIC’s overseas businesses are currently undergoing full integration with QIC, which brings operational and management challenges,” S&P in a statement said.
“The final rating is the same as the anchor, reflecting our view that the potential modifying factors–principally QIC’s satisfactory management and governance, adequate enterprise risk management (ERM), and exceptional liquidity–are currently neutral for the ratings.
“QIC’s strong business risk profile reflects its strong competitive position, achieved through its dominant domestic position and regional GCC operations. We believe the broad diversity of its product offerings and strength in distribution and sourcing are key factors supporting its competitive position. The group is one of the largest insurers in the GCC and is now expanding further via its rapidly growing reinsurance arm, Qatar Reinsurance (Qatar Re), and the acquisition of Antares Syndicate 1274 at Lloyd’s this year. During the next two years, we expect QIC’s group premium to develop from being predominantly sourced from the GCC to 50% non-GCC business; we forecast premium growth at about 70% in 2014, easing back to 20% and below in 2015 and 2016.
“We regard QIC’s financial profile as very strong, mainly reflecting its very strong capital and earnings, intermediate risk position, and adequate financial flexibility. QIC benefited from a significant injection of new capital in 2013 when subscribed capital rose 44% and shareholder funds increased by 42%. We expect extremely strong risk-based capital adequacy to be maintained in the next two years of rapid franchise growth, although in absolute terms capital redundancy will diminish.
“Retained earnings will support capital, and we expect QIC to show combined ratios lower than 95% during 2014-2016 .(Lower combined ratios indicate better profitability. A combined ratio of greater than 100% signifies an underwriting loss.) We forecast net earnings above Qatari riyal 660 million representing a return on equity above 10% and a return on revenues above 15%.
“The stable outlook reflects our view that QIC’s capital and earnings will continue to be very strong and sufficient to support its significant expansion plans. Its financial strength will continue to be reinforced by extremely strong capital adequacy and stable positive earnings.”