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A.M. Best Affirms Ratings of the International General Insurance Group Companies

Posted on 10 Jul 2012 by Neilson

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A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of A- (Excellent) and the issuer credit ratings (ICR) of “a-” of International General Insurance Company Limited (IGI) (Bermuda) and International General Insurance Company (UK) Limited (IGIUK) (United Kingdom). A.M. Best also has affirmed the ICR of “bbb-” of International General Insurance Holdings Limited (IGIH) (United Arab Emirates). The outlook for all ratings remains stable.

The ratings of IGI reflect its strong risk-adjusted capitalisation, improving technical performance, conservative investment strategy and strengthened risk management framework. However, the ratings also take into account the company’s relatively small size and business line concentration risk in the energy sector.

Whilst the company remains fairly small in absolute terms, in A.M. Best’s opinion, IGI’s risk-adjusted capitalisation remains strong, benefitting from good earnings and a sound level of profit retention. The company’s underwriting leverage remains at a reasonable level, whilst the credit risks and investment risks are reduced by the company’s conservative investment strategy and well-rated panel of reinsurers.

IGI’s profitability has improved markedly in the last two years following an improvement in underwriting guidelines and controls. In 2011, the company recorded an impressive combined ratio of 82.7%. Technical profits continue to support net income with investment returns making a modest yet stable contribution.

IGI has made significant improvements to its enterprise risk management in the past 12 months, which A.M. Best views positively. In A.M. Best’s opinion, the company now takes a more sophisticated approach to its risk management processes, managing its capital requirements through an economic capital model.

Despite the continued diversification in recent years, IGI’s business remains somewhat concentrated in the energy business. Going forward, A.M. Best expects diversification to continue through the growth of non-energy business lines.

The ratings of IGIUK benefit from rating enhancement given A.M. Best’s assessment of its importance to the group, a view supported by the full parental guarantee from IGI. IGIUK remains in the start phase and is expected to benefit from the continued portfolio transfer from IGI going forward. IGIUK’s business concentration in marine, the group’s poorest performing business line, is expected to continue to strain profitability in 2012 and will be monitored closely by A.M. Best. Standard notching is applied to IGIH, the group holding company, in line with A.M. Best methodology.

In A.M. Best’s opinion, positive rating actions are likely to result from a strengthening of IGI’s business profile whilst maintaining a good level of risk-adjusted capitalisation and establishing a good track record of technical profitability. Negative rating pressure may emerge should the company experience a material deterioration in risk-adjusted capitalisation or operating performance.