OREANDA-NEWS. A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of “a-” of Qatar General Insurance and Reinsurance Company S.A.Q. (QGIR) (Qatar). The outlook for both ratings is stable.

The ratings reflect QGIR’s strong risk-adjusted capitalisation, sound track record of operating performance and enhanced enterprise risk management (ERM) capabilities. Offsetting rating factors are the company’s declining trend in underwriting performance and its high concentration in Qatari real estate and equity assets.

A.M. Best expects QGIR’s prospective risk-adjusted capitalisation to remain strong and supportive of the company’s projected growth over the medium term. Capital requirements are driven by QGIR’s investment risk, with over 90% of its portfolio held in real estate and equities at year-end 2015. However, QGIR has sufficient shareholders’ equity to absorb this concentrated investment profile and has proven its ability to prudently manage its exposures.

In 2014, the company reported earnings of QAR 920 million (USD 253 million), with this result benefiting from strong gains on the Qatar stock exchange. During 2015, however, headwinds in regional equity markets have significantly depressed QGIR’s investment income and therefore its operating performance. During the first three quarters of 2015, profit was QAR 141 million compared with QAR 172 million in 2014. Investment losses taken through the equity account resulted in total comprehensive income of QAR 9.7 million compared with QAR 286 million in 2014. Underwriting performance has deteriorated over the past three years, with 2015 likely to see a technical breakeven taking into account QGIR and its Shari’a compliant subsidiary, General Takaful Company S.P.C.. While performance has significantly improved at QGIR, General Takaful’s motor book continues to report very high loss ratios resulting in an underwriting loss at the subsidiary. QGIR has taken a number of steps focused on risk selection and claims monitoring to reverse this trend.

QGIR is the second-largest insurer in the Qatari market. Its profile is enhanced by General Takaful, which generates gross contributions in excess of QAR 240 million.

QGIR has strengthened its ERM capabilities in recent years, developing an internal capital model and applying stress tests on the company’s balance sheet, incorporating underwriting and asset-related scenarios. QGIR prudently manages its risks, maintaining sufficient liquidity to support its insurance operation. Advances in ERM will require further embedding in the organisation over the medium term.