A.M. Best Europe – Rating Services Limited has affirmed the financial strength rating of ‘A-‘ (Excellent) and the issuer credit rating of “a-” of Bermuda-based International General Insurance Company Limited (IGI), and the ICR of “bbb-” of International General Insurance Holdings Limited (IGIH), which is based in the United Arab Emirates. The outlook for all of the ratings remains stable.
The ratings reflect IGI’s “strong risk-adjusted capitalization, its improved technical profitability, which is expected to stabilize following business restructuring, conservative investment strategy and its developing risk management framework,” Best explained. “The ratings also take into account its business line concentration risk in energy.”
Best added that in its opinion “IGI continues to display a strong risk-adjusted capital position with sufficient room to absorb projected growth of 10 percent to 15 percent per annum over the next two years.
“IGI’s capital position strengthened in 2010 through the retention of improved net income and a $10.7 million transfer in retained earnings from a sister company, and has been further strengthened in June 2011 by a $12.3 million capital injection from the parent.”
Best also indicated that it “expects the improvement in profitability to continue, with a sound level of profit retention supporting capital in line with growth plans.” Best noted that the company’s unconsolidated risk-adjusted capital position was weakened in early 2011 through the capitalization of its wholly owned subsidiary, International General Insurance Company (UK) Limited (IGIUK); however, in Best’s stress tests find IGI’s unconsolidated risk-adjusted capitalization to remain resilient and set to strengthen through the transfer of business, and risk, to IGIUK.”
Best’s analysis also pointed out that “IGI’s technical performance has seen a marked improvement since restructuring its portfolio following large losses in 2008. The withdrawal from Gulf of Mexico business and the realignment of its marine portfolio have seen the company drive its loss ratio down from 83.0 percent in 2008 to 57.9 percent in 2010, with IGI posting an 87.9 percent combined ratio for 2010.
“Underwriting profits will continue to drive profitability going forward, given the modest contribution from the company’s investment income (approximately 3.5 percent return in 2010), due to IGI’s conservative approach to investments.
In addition Best noted that “IGI continues to develop its risk management function, which has enabled the company to identify and mitigate risk more effectively. Going forward, the company is implementing a Solvency II readiness plan, aligned with its recently approved FSA-regulated subsidiary.
“IGI’s business line concentration risk in the energy sector is 42.7 percent of net premiums written in 2010,” according to best’s analysis. However, the rating agency indicated that “in recent years management have significantly improved the company’s business diversification, with further diversification expected in 2011.”
Source: A.M. Best
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