AM Best Affirms Credit Ratings of Noor Takaful General PJSC

AM Best has affirmed the Financial Strength Rating of B (Fair)
and the Long-Term Issuer Credit Rating of “bb” of Noor Takaful General
PJSC (NTG) (United Arab Emirates). The outlook of these Credit Ratings
(ratings) remains stable.

The ratings reflect NTG’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.

The company’s balance sheet strength is underpinned by its risk-adjusted
capitalisation, which remained at the strongest level as at year-end
2017, as measured by Best’s Capital Adequacy Ratio (BCAR). Given NTG’s
small capital base, AM Best believes prospective risk-adjusted
capitalisation is susceptible to volatility and dependent on the
portfolio’s future growth and performance. The balance sheet strength
assessment also considers NTG’s conservative investment portfolio and
its proven financial flexibility in the form of capital injections.
Capital management actions recently undertaken by the company have
ensured NTG is now compliant with local solvency regulations.

NTG’s operating performance is marginal, having generated underwriting
losses in each of the past five years. Underwriting results are
underpinned by volatile claims experience with the company reporting a
five-year (2013-2017) average non-life combined ratio of 114% (as
calculated by AM Best). NTG generated a modest operating profit of AED
0.2 million in 2017, with investment returns more than offsetting
technical losses incurred during the year. Third-quarter results in 2018
indicate an improvement in technical returns as a result of stricter
underwriting discipline, with the company’s loss ratio reducing to 34%
from 52% for the same period during 2017. AM Best expects that NTG will
deliver modest operating profits for year-end 2018.

NTG’s business profile is limited as a result of the small size of its
portfolio concentrated exclusively within the UAE Takaful insurance
market. The company is targeting an ambitious growth strategy to enhance
its presence in its core lines of business; however, NTG’s business
plans carry significant execution risk given the highly competitive
nature of the insurance markets it operates within.

This press release relates to Credit Ratings that have been published
on A.M. 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 A.M. Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best’s Credit Ratings. For information on the proper media
use of Best’s Credit Ratings and A.M. Best press releases, please view Guide
for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating
Action Press Releases.

A.M. Best is a global rating agency and information provider with a
unique focus on the insurance industry. Visit www.ambest.com
for more information.

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