Gulf Insurance Group (GIG) is expected to see its gross written premium remain broadly flat for 2024 but fall in 2025 following the revocation by the Health Ministry of a health insurance contract for retired citizens which had been awarded to the Group, according to AM Best.
However, GIG is expected to comfortably manage the financial strain caused by the revocation.
On 12 September 2024, the Kuwait Ministry of Health notified GIG of its decision to revoke the contract with immediate effect. This was a particularly large insurance scheme (called AFYA).
Operating performance
GIG has a record of strong operating performance and in 2023 reported post-tax profits of KWD29.5m ($96.3m), equating to a return on equity of 8.0%, as calculated by AM Best. Earnings for the year were supported by positive underwriting and investment results, with a net investment return of 5.4%, as calculated by AM Best, despite taking a KWD10.8m impairment on an investment. GIG reported healthy results for the first six months of 2024, with a post-tax profit of KWD18.9m.
Ratings upgraded
On 4 October, AM Best said that it had upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a+” (Excellent) from “a” (Excellent) and affirmed the Financial Strength Ratings of A (Excellent) of GIG and Gulf Insurance and Reinsurance Company (GIG-Kuwait). The outlook of these credit ratings is ‘Stable’.
The ratings reflect GIG’s consolidated balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
GIG-Kuwait is a composite insurer with a leading position in Kuwait’s insurance market. The company is strategically important to GIG and integrated into its operations.
The Long-Term ICR upgrade reflects AM Best’s recognition of implicit support provided to GIG by its ultimate parent, Fairfax Financial Holding, which has recently increased its holding to 97.1%. GIG’s ratings benefit from the favourable financial flexibility and significant capital resources of the ultimate holding company. In addition, GIG benefits from shared expertise including ERM, reinsurance, actuarial, talent, and investment management among other less quantifiable benefits, such as best practices and capital management.
GIG’s balance sheet strength assessment is underpinned by consolidated risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects that GIG will maintain BCAR comfortably above the threshold for the strongest assessment level. GIG’s balance sheet strength benefits from a comprehensive reinsurance programme and a relatively conservative investment strategy. The group’s balance sheet is exposed to a moderate level of financial leverage, which is expected to diminish over the medium term, as well as elements of country risk through its regional operations.
Business profile
GIG is amongst the largest and most diversified insurance groups in the Middle East and North Africa (MENA) region. GIG holds leading positions across its core markets, which include Kuwait, Jordan, Bahrain, Saudi Arabia, the UAE, Qatar, Oman, Egypt, Turkiye, and Algeria. The group has profitably grown its footprint across the MENA region in recent years through acquisitions, including that of Bahrain-registered Gulf Insurance Group (Gulf) in 2021, and organic growth. The group reported insurance service revenue of KWD0.82bn ($2.7bn) in 2023.
Moody’s and S&P ratings
On 3 October, GIG announced that S&P Global Ratings has reaffirmed the Group’s outlook at “Positive” while reaffirming its long-term issuer credit and financial strength ratings at ‘A’. This rating applies to both the Group and its subsidiary, GIG-Kuwait. Moody’s reaffirmed the Group’s rating at ‘A2’ with the outlook remaining at ‘Stable’.