News, ratings

Credit Agency Gives Tawuniya ‘A’ Rating

Insurance company’s strong underwriting performance recognised by Standard & Poor’s.

Tawuniya/The Company for Cooperative Insurance has secured an ‘A’ rating from Standard & Poor’s after maintaining its “market leading position”.

The credit rating agency said the company was still the leading player in Saudi Arabia, despite strong competition from rival insurers.

Standard & Poor’s (S&P) added that Tawuniya’s strong underwriting performance contributed to its rating.

Concerns, however, were raised about the company’s capitalisation.

“Recent capital strategies are viewed as a relative weakness, as only a limited level of capital increase has taken place to date and recent strong earnings have been offset by the proposed dividend for 2009 of SAR200 million,” said S&P credit analyst Neil Gosrani.

“The company has accepted a significant rise in premium risk, which has also increased the need for capital support. Overall capitalisation is assessed as good, although it is a relative weakness for the ratings at their current level.”

Tawuniya is expected to introduce more cost-effective capital management and formulate a plan to strengthen its balance sheet in the coming months, Gosrani added.

“This is expected, ultimately, to result in capital adequacy being raised and maintained at a level more-appropriate for the current rating level.

“However, if the company fails to make substantive progress toward implementing a more-effective approach to capital management, this may lead to downward pressure on the ratings.”

According to S&P’s rating report, Tawuniya’s earnings will reflect its solid underwriting and investment results as financial markets stabilise. It added that the company would remain Saudi Arabia’s leading insurer, with no additional staff attrition expected despite an increase in competition.