AM Best Affirms Credit Ratings of Alliance Insurance (PSC)

AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Alliance Insurance (PSC) (Alliance) (United Arab Emirates) [UAE]. The outlooks of these Credit Ratings (ratings) are stable.

The ratings reflect Alliance’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.

Alliance’s balance sheet strength is underpinned by its risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), at the strongest level. AM Best expects the company to maintain a significant capital buffer in excess of the strongest BCAR threshold, supported by low underwriting leverage and a conservative investment portfolio allocation. An offsetting factor in the balance sheet strength assessment is Alliance’s dependence on reinsurance for its non-life insurance risks; however, the associated credit risk is mitigated partially by the use of a diversified reinsurance panel of sound financial strength.

Alliance has a record of strong operating performance evidenced by a five-year (2019-2023) weighted average return on equity (ROE) of 9.3%. The company’s performance continues to be principally driven by its life underwriting profits, which remained robust in 2023. Alliance’s non-life underwriting performance has reduced in recent years following strong topline growth in its medical and motor businesses during 2022. Both segments have been under intense pricing pressure due to the competitive environment in the UAE. This resulted in a weakening in the company’s technical non-life results, leading to net/net combined ratios, as calculated by AM Best, of 131.2% and 134.5% in 2023 and 2022, respectively. Management has taken action to remediate the poor performance on its non-life portfolio, and the effects of the measures taken are expected to become visible during 2025. Alliance’s performance is further supported by robust investment income, with net investment return ranging between 4.0% and 6.3% between 2019 and 2023.

Alliance’s business profile as a mid-tier domestic market participant is unlikely to change over the near term as it has limited product diversification and operates in an increasingly competitive UAE insurance market, where finding profitable growth opportunities is a challenge.

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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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