S&P Global Ratings has upgraded the long-term issuer credit and insurer financial strength ratings for Al-Khaleej Takaful Insurance Co (AKTI) to 'A-' from 'BBB+' (positive). The outlook is 'Stable'.
AKTI said in a statement filed with the Qatar Stock Exchange, “This rating action is due to the company building a track record of strong operating performance consistently outperforming the market average in terms of underwriting results, in addition to the significant improvements in its risk profile by taking various derisking actions.”
In February 2025, AM Best announced that it had assigned a Financial Strength Rating of ‘A-’ (Excellent) and a Long-Term Issuer Credit Rating of ‘a-’ (Excellent) to AKTI. A ‘Stable’ outlook was assigned to these credit ratings.
AM Best said that the ratings reflected AKTI’s balance sheet strength, which the global credit rating agency assessed as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
AKTI is a takaful insurer and operates through a hybrid model, whereby the shareholders’ fund (SHF) charges the policyholders’ fund (PHF) a wakala fee based on gross written contributions (GWC) and a mudarabah fee based on investment income.
AM Best considered the company’s risk-adjusted capitalisation on a combined basis, including its policyholders’ and shareholders’ funds, due to the strength of domestic regulation and requirements that the shareholders’ fund would have to support the PHF if it were to fall into deficit.
The agency said, “Despite its meaningful exposure to Qatari real estate, overall, the company has a conservative and liquid investment portfolio, with cash and sukuk holdings covering net technical reserves by 264.6% at the end of the third quarter of 2024. An offsetting factor to the balance sheet strength assessment is the company’s moderately high reliance on reinsurance, which is mitigated partially by a reinsurance panel of excellent credit quality.”
AM Best noted that AKTI had reported robust underwriting performance consistently, with a five-year (2019-2023) weighted average combined ratio (including short-term life results) of 83.6%. Earnings are balanced between SHF and PHF, with both funds achieving growth over recent years.
Overall operating performance has been volatile in the past, driven by fluctuations in investment returns. Since 2020, AKTI has taken actions to derisk its investment portfolio, which has translated into progressive improvements in return on equity (ROE), with the company achieving double-digit ROEs since 2022. Despite good growth, AKTI has a relatively low product diversification, with its business mix mainly dominated by motor and medical lines on a net basis.