(MENAFN- Muscat Daily) Standard & Poor's Ratings Services has affirmed its BBB insurer financial strength and counterparty credit ratings on Oman United Insurance Co (OUIC). The outlook is stable.
The ratings reflect our view of OUIC's fair business risk profile and moderately strong financial risk profile. These assessments lead to an anchor of bbb S&P said. 'Potentially modifying factors remain neutral to the outcome; we continue to assess management and governance as fair enterprise risk management as adequate and liquidity as strong.'
Operating exclusively in Oman S&P said OUIC faces moderate industry and country risk. 'This reflects among other factors the often-modest return on equity generated by local insurers due to persistent pricing pressures in a crowded highly competitive sector. It also reflects Oman's exposure to occasional flooding caused by tropical storms and our lower but still-strong sovereign credit ratings on Oman.'
The ratings agency said OUIC has an adequate competitive position by global standards with operations solely in Oman through 12 branches as well as some 24 independent tied agents and several local brokers.
'Given OUIC's policy of selectivity in its competitive environment we expect gross premiums to grow by only five to seven per cent in both 2015 and 2016 leading to reasonable net combined ratios (net claims and expenses as a percentage of net premiums earned) of around 95 per cent on average after 94 per cent in 2014 and net income of RO3mn-RO4mn annually with investment gains as the main variable.'
S&P said it assess OUIC's risk position as having improved to intermediate from moderate largely on the reduced concentration of investment risks but also a slight decrease in the proportion of high-risk assets held notably Omani equities and real estate.
'Although Oman is occasionally hit by tropical storms and floods we now incorporate these risks into the industry risk element of our insurance industry country risk assessment (IICRA) and we weight our capital modeling of OUIC to allow for exceptional losses.'
S&P said the stable outlook reflects its view that OUIC's leading competitive position in the Omani insurance market will enable it to achieve base-case earnings assumptions which should enable reinforced capital adequacy to more than offset the strain resulting from new business growth and investment risk.
'We may raise the ratings if industry and country risk in Oman diminishes or if OUIC continues to grow profitably while improving its modeled capital adequacy outcomes to extremely strong levels. Although not expected we could lower the ratings if capital adequacy weakens to a less than adequate level due to reduced earnings investment losses or excessive dividend payments to shareholders' the international ratings agency added.
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