Oman Insurance outlook revised to stable after 'robust underwriting'

by

• Stephanie Denton
• 24 Aug 2012

The Oman Insurance Company PSC (United Arab Emirates) has had its outlook revised from negative to stable after a robust underwriting performance.

AM Best Europe said also affirmed the financial strength rating of A (Excellent) and the issuer credit rating of "a".

The agency said the ratings reflect OIC's strong level of risk-adjusted capitalisation, robust underwriting performance and leading local business profile.

Offsetting rating factors include a historically volatile and concentrated investment portfolio and execution risks surrounding a significant corporate wide transformation.

The outlook for OIC's ratings has been revised to stable following a significant improvement in its investment guidelines and the initiation of numerous initiatives focused on improving risk management, internal procedures and controls.

In light of new investment guidelines and the intentions of senior management, AM Best anticipates that OIC will divest from some of its more illiquid equity positions over the short term. This will benefit OIC by significantly improving its level of risk-adjusted capitalisation and reducing the potential volatility of both its risk-adjusted capitalisation and overall financial performance. AM Best anticipates that the company's internally generated capital will sufficiently support new business growth over the coming years.

During the past year, OIC's senior management team has almost entirely changed. The company's new personnel bring with them significant experience in both the international and local insurance markets. OIC's new management team has completed a review of its strategy and all of its functions.

Changes implemented or that are underway include: revised investment and underwriting guidelines; a revised reinsurance structure; strengthened internal controls; the centralisation of functions such as pricing, reserving and claims; a revised distribution strategy; and an enhanced enterprise-wide risk management framework.

OIC's underwriting performance remained strong in 2011, with the company reporting a combined ratio for non-life business (excluding medical) of 71% (2010: 78%). Offsetting OIC's good underwriting results was a marginal investment return and significant non-technical expenses. Results for the first half of 2012 indicate a moderate decline in underwriting profitability, although the results are expected to remain good and in line with that of 2010.

AM Best anticipates that OIC's overall investment return will remain marginal in 2012 as the company modifies its assets holdings, although improvements can be expected from 2013 and onwards.

The company is expected to strengthen its position locally and increase its level of geographic diversification over the medium term.

Positive actions on OIC's ratings can arise over the medium term if the company is able to develop its business profile in line with its business plans and embed sophisticated enterprise-wide risk management within management's decision making process, while at the same time reducing various concentration risks, maintaining a strong level of risk-adjusted capitalisation and good profitability.

There will be negative pressure on OIC's ratings if it is unable to maintain its current good level of risk-adjusted capitalisation, financial performance or business profile.

 

Insurance Insight