Emirates Insurance Co (EIC) will maintain its competitive position, premium growth trend, and positive underwriting performance, says S&P Global Ratings (S&P).
In 2023, EIC's insurance revenue under IFRS 17 grew by 3% to AED1.13bn [$308m] (2022: AED1.10bn). S&P notes that the growth rate for EIC was lower than its market growth expectation of 10%-15%. This was primarily due to EIC's relatively higher proportion of commercial business while the market growth mainly stemmed from retail lines like motor and medical.
That said, for 1Q2024, EIC's insurance revenue under IFRS17 rose by 8%, and S&P anticipates EIC's insurance revenue will grow 5%-10% over the next two years.
In addition to its headquarters in Abu Dhabi, EIC has an office in Dubai, from which it writes international reinsurance business primarily across Africa and Asia. EIC generated about 88% of its total revenue from the UAE property and casualty (P/C) sector, while the remaining 12% was sourced through its international division in Dubai.
Underwriting results
In 2023, EIC reported a material improvement in its underwriting results as its net combined ratio (under IFRS17) fell to 81.8% from 86.5% in 2022. Its historical five-year average net combined ratio is about 89%.
S&P expects EIC to maintain its conservative underwriting discipline and report net combined ratios in the 85%-90% range in 2024-2025.
Investments
In S&P’s view, EIC will effectively manage risk exposures emanating from listed equities and fixed-income instruments in its investment portfolio. At 31 December 2023, about 51% of EIC's total investments were in equities (mainly UAE-listed equities), 29% in fixed-income instruments, and the balance of about 20% in cash and bank deposits. Although about half of EIC's investments are in equities (which S&P considers high-risk assets), the global credit rating agency thinks the company has sufficient capital adequacy buffers (as per its model) to absorb any potential volatility. S&P also expects EIC to take adequate corrective action in case any of the risk exposures breaches its risk appetite.
Ratings affirmed
S&P has affirmed EIC’s 'A-' long-term issuer credit and insurer financial strength ratings. The outlook is ‘Stable’. The agency views EIC's capital and earnings as very strong.
The ‘Stable’ outlook indicates that S&P expects EIC's capital adequacy to remain at the 99.99% confidence level, as measured by the agency’s risk-based model, supported by profitable earnings from both underwriting and investment activities over the next two years.
Capital adequacy
EIC is expected to maintain sufficient capital adequacy buffers above the 99.99% confidence level, as per S&P’s capital model. The agency considers the company's robust risk-based capital adequacy a key rating strength.
S&P expects EIC will maintain this over the next two years, supported by positive net income projections and dividend payouts in line with the historical average. EIC's primary source of additional capital and liquidity is through retained earnings and S&P believes the insurer's need for additional capital is limited at this stage. EIC's shareholders' equity increased to AED1.28bn at the end of 2023 from AED1.15bn at the end of 2022.