AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Kuwait Reinsurance Company K.S.C.P. (Kuwait Re) (Kuwait). The outlook of these Credit Ratings (ratings) remains stable.
The ratings reflect Kuwait Re’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
Kuwait Re’s balance sheet strength is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s balance sheet strength also benefits from prudent reserving practices and sufficient liquidity to support operations with liquid assets to net technical reserves of 102% at year-end 2019. Capital consumption is driven predominantly by underwriting risks, due to the company’s ongoing top line growth in 2019 and high premium retention.
Kuwait Re’s focus on underwriting discipline has translated into improved technical performance in recent years, reducing historic volatility in operating results. The company has reported a healthy five-year average (2015-2019) combined ratio of 96.6%. Investment income has further supported overall profitability, contributing to pre-tax profits of KWD 5.0 million in 2019 (2018: KWD 3.5 million), which translated to a return on equity of 9.3% for the year.
Kuwait Re’s business profile is supported by its good geographical diversification, through operations spanning the Middle East and North Africa, Asia-Pacific and Central and Eastern Europe. The underwriting portfolio is well-diversified by line of business, providing proportional and non-proportional cover to its cedants. In 2019, Kuwait Re wrote gross written premiums of KWD 57.0 million, a 22.4% increase on 2018, with growth coming from the company’s proportional portfolio, particularly in the Indian subcontinent. Kuwait Re continues to update its underwriting strategy based on market performance, intending to maintain a well-balanced underwriting portfolio.