LONDON–(BUSINESS WIRE)–AM Best has revised the outlooks to positive from stable and
affirmed the Financial Strength Rating of B (Fair) and the Long-Term
Issuer Credit Rating of “bb+” of National Takaful Company (Watania) PJSC
(Watania) (United Arab Emirates).
The Credit Ratings (ratings) reflect Watania’s balance sheet strength,
which AM Best categorises as strong, as well as its marginal operating
performance, limited business profile and marginal enterprise risk
management (ERM). The revised outlooks reflect Watania’s sustained
improvement in operating performance, as the new management team
successfully executes its business plan.
Since inception in 2011, Watania has had a track record of weak
earnings, largely stemming from poor technical performance, with
accumulated losses eroding shareholders’ equity. However, following a
change in senior management in 2016, Watania has embarked on strategic
initiatives to stabilise its operations, adopting stricter underwriting
controls and tighter claims management. Furthermore, although Watania
operates independently, it benefits from cost efficiencies achieved
through synergies with its sister company, Al Madina Insurance Company
SAOG. Over the past three years (2016-2018), the company’s combined
ratio has trended down, reaching 87.6% in 2018. Consequently, overall
earnings also have improved considerably, reaching AED 12.3 million in
2018, thereby demonstrating the successful execution of its business
plan. Additionally, the company’s conservative investment portfolio
continues to contribute positively to the overall profitability,
producing an investment yield of 3.4% in 2018.
AM Best assesses Watania’s balance sheet strength as strong, underpinned
by risk-adjusted capitalisation, as calculated by Best’s Capital
Adequacy Ratio (BCAR), at the strongest level. Watania has strengthened
its shareholders’ equity, mainly through internal capital generation,
and is in compliance with all regulatory solvency thresholds. The
company’s balance sheet benefits from a well-rated reinsurance panel,
the absence of leverage, and highly liquid investment portfolio.
Offsetting factors include the company’s small balance sheet, material
exposure to higher risk asset classes and limited financial flexibility.
The company has a limited business profile in its domestic market,
writing approximately AED 300 million in gross written contributions in
2018. The company operates solely in the UAE and consistent with other
market participants, writes predominantly motor and medical insurance.
Reduction of business volumes from poor performing accounts have been
replenished through price increases and new business generated through a
wider distribution network. AM Best expects Watania to continue to grow
in line with its business plan, although market conditions remain
challenging given the high level of competition.
AM Best assesses Watania’s ERM as marginal given that the current lack
of formalisation in its risk management framework, and accompanying
controls and procedures. AM Best expects that as the company continues
with its strategic transformation, management will make meaningful
enhancements to the company’s ERM framework.
AM Best deviates from its Available Capital and Holding Company Analysis
methodology in its analysis of Watania, as no financial information is
available for its ultimate parent company, MB Holding Company LLC
(Oman). Mitigating rating factors are Watania’s independence from the
group with limited inter-company transaction and no evidence of
financial strain imposed by the parent. Furthermore, Watania is listed
on the Abu Dhabi stock exchange and must comply with requirements set by
the UAE Insurance Authority and UAE Company Law. MB Holdings LLC (UAE),
a shell and sister company of MB Holding Company LLC, owns 51% of
This press release relates to Credit Ratings that have been published
on AM Best’s website. For all rating information relating to the release
and pertinent disclosures, including details of the office responsible
for issuing each of the individual ratings referenced in this release,
please see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
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Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its
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Jessica Botelho-Young, CA
Senior Financial Analyst
20 7397 0310
Salman Siddiqui, ACA
Associate Director, Analytics
20 7397 0331
Manager, Public Relations
908 439 2200, ext. 5159
Director, Public Relations
439 2200, ext. 5644