International credit rating agency Moody’s Thursday upgraded Damaan Islamic Insurance Company's (Beema) insurance financial strength rating (IFSR) to 'A3' from 'Baa1' with a "stable" outlook.
The upgrade follows changes in the company’s governance and financial strategy and notably the implementation of stricter safeguards to limit the risks associated with its sukuk investment portfolio and the level of leverage.
The changes resulted in a reduction of the total leverage to 37.3% at the year ended (YE) 2020 from 42.1% at the year ended 2019. As importantly, the company intends to maintain these reduced leverage levels.
The changes in the investment portfolio have also alleviated previous pressures on capital adequacy and liquidity. Liquidity improved two times during YE 2020 from 1.9x at YE 2019, whilste capital adequacy continued to strengthen with consolidated (shareholders' and policyholders') equity equating to 35.1% from 32.8% over the same periods.
Beema has a low ratio of high risk assets (HRA) as a proportion of consolidated equity (55.5% at YE 2020), with the vast majority of investments held as cash, bank deposits and investment grade sukuk.
Beema has continued to report strong profitability, in terms of underwriting and overall profit, with a five-year average combined ratio (COR) of 79.8%, a five-year average return on capital (ROC) of 9.8% at YE 2017 and a high sharpe ratio of return on capital of 609.9%, which indicates a low volatility of results in the last five years.
The A3 IFSR is also supported by the company’s strong market position and brand, as the second largest player within the domestic takaful market and amongst the top seven insurers in the overall Qatari insurance market in terms of premium contributions written in 2020.
However these strengths are partly offset by Beema’s concentration to the Qatari insurance market and the elevated level of competition in this market, as well as a relatively still high level of leverage compared to its peers.
The "stable" outlook reflects Moody’s expectation that Beema will maintain its strong capital adequacy via good and stable retained profits whilst maintaining its market position and ensuring financial leverage stays below 40%.
Given the recent upgrade, further upward pressure is "unlikely" in the short term; but the rating could move upwards in the medium term if it penetrates into the top three insurers in Qatar with a relative market share higher than 3x; and/or if its achieves wider geographic diversification, with a commanding position in the wider Gulf Cooperation Council region, Moody’s said.
The upgrade follows changes in the company’s governance and financial strategy and notably the implementation of stricter safeguards to limit the risks associated with its sukuk investment portfolio and the level of leverage.
The changes resulted in a reduction of the total leverage to 37.3% at the year ended (YE) 2020 from 42.1% at the year ended 2019. As importantly, the company intends to maintain these reduced leverage levels.
The changes in the investment portfolio have also alleviated previous pressures on capital adequacy and liquidity. Liquidity improved two times during YE 2020 from 1.9x at YE 2019, whilste capital adequacy continued to strengthen with consolidated (shareholders' and policyholders') equity equating to 35.1% from 32.8% over the same periods.
Beema has a low ratio of high risk assets (HRA) as a proportion of consolidated equity (55.5% at YE 2020), with the vast majority of investments held as cash, bank deposits and investment grade sukuk.
Beema has continued to report strong profitability, in terms of underwriting and overall profit, with a five-year average combined ratio (COR) of 79.8%, a five-year average return on capital (ROC) of 9.8% at YE 2017 and a high sharpe ratio of return on capital of 609.9%, which indicates a low volatility of results in the last five years.
The A3 IFSR is also supported by the company’s strong market position and brand, as the second largest player within the domestic takaful market and amongst the top seven insurers in the overall Qatari insurance market in terms of premium contributions written in 2020.
However these strengths are partly offset by Beema’s concentration to the Qatari insurance market and the elevated level of competition in this market, as well as a relatively still high level of leverage compared to its peers.
The "stable" outlook reflects Moody’s expectation that Beema will maintain its strong capital adequacy via good and stable retained profits whilst maintaining its market position and ensuring financial leverage stays below 40%.
Given the recent upgrade, further upward pressure is "unlikely" in the short term; but the rating could move upwards in the medium term if it penetrates into the top three insurers in Qatar with a relative market share higher than 3x; and/or if its achieves wider geographic diversification, with a commanding position in the wider Gulf Cooperation Council region, Moody’s said.