A.M. Best Europe Says Outlook is ‘Stable’ For National General Insurance

A.M. Best Europe Rating Services has affirmed the financial strength rating of B++ Good and the issuer credit rating of bbb+ of the National General Insurance Co. located in the United Arab Emirates. The outlook for both ratings is stable.

The ratings reflect National General’s strong risk-adjusted capitalization, good track record of overall profitability and established domestic franchise. An offsetting rating factor is the insurer’s developing level of enterprise risk management (ERM).

The insurance firm’s prospective risk-adjusted capitalization is likely to remain strong. The company is expected to maintain a good balance between earnings retention and profit distribution, supporting its projected business growth over the near term. NGI’s capital requirement is driven by its investment profile, which is concentrated in equities and real estate. At present, risk-adjusted capitalization is sufficient to absorb potential volatility in these higher risk assets.

National General has demonstrated a good track record of generating profits with return on capital and surplus averaging 12 percent in the last five years. In 2012, overall earnings rebounded to $13 million, in line with the insurer’s historical performance. National General Insurance Co.’s net income is supported by a good level of technical profitability across most business segments, returning a healthy combined ratio of 91 percent in 2012. Additionally, the insurer’s investment yield stabilized in recent years at 1.5 percent when excluding realized and unrealized gains.

National General is the seventh-largest insurance company in the UAE on a gross written premium basis with most of its business generated locally. The insurer’s premium revenue is well diversified on a gross basis and skewed towards motor, medical and life businesses on a net basis. Furthermore, the insurer retains 67 percent of its overall premium revenue.

The company started developing a risk management framework in 2010. But, A.M. Best perceives current risk management to be marginal in relation to its risk profile. Additionally, A.M. Best officials said they will monitor the insurer’s reserve position going forward, given that its net loss reserve to net written premium ratio has decreased to its lowest level in 2012.

“Going forward, negative rating pressure could result from a deterioration in the National General Insurance Co.’s overall performance or material weakening in its risk-adjusted capitalization,” said A.M. Best officials. “Upward movement is likely to emanate from a developed and integrated ERM framework.”

Still, as one of the largest insurance companies in the United Arab Emirates, National General offers a variety of property and casualty products as well as life insurance plans to help protect local families and business interests. And commercial insurance products are available to help preserve the many business interests constantly arising in the Middle East and the Unite Arab Emirates. The A.M. Best Europe ratings take into account a great number of factors, which are too many to list. But when the reputable third party ratings firm affirms an insurance company’s financial strength rating, the most stringent of criteria have been applied to help come up with the most accurate and likely predictions of future performance based on current trends. By Mike Heuer