Capital Standards Rating affirms Al Safat Takaful Company at BB

03/10/2012 08:47 AST

Capital Standards Rating Co. (CSR) has affirmed the Insurer's Financial Strength Rating (IFSR) at 'BB' and the national rating at 'BBBkw' for Al Safat Takaful Company (closed); the outlook for the rating remains stable.

Al Safat Takaful has shown improvements in retaining market position particularly in the local takaful market. In addition, the rating reflects Al Safat Takaful's adequate capitalisation, with a low underwriting leverage compared to the total capital base. Historically, the company has been able to effectively manage underwriting costs, with the cost structure ratio being steadily on a declining trend for the past five years resulting in an overall better underwriting performance.

The company implements a conservative reserve accumulation strategy and relies heavily on reinsurance for its marine & aviation and general accident segments. The company's rating is however constrained by its high risk assets (mainly local quoted and unquoted equities) coupled with the investment losses which are threatening the company's financial performance, given the risky nature of these investments. The liquidity position is also weakening the company's financial flexibility and is considered low when compared to its markets peers. The outlook reflects CSR's view of the continued improvement in the company's insurance underwriting performance. The rating is also positively impacted by the changes that CSR made to the "Insurance Rating Methodology".

The rating methodology used in rating Al Safat Takaful is "Insurance Rating Methodology", and the "Takaful - Rating Approach" and it can be found at www.capstandards.com in the 'methodologies brief' sub-directory under the Rating tab.

Al Safat Takaful Insurance Company was established in 2005 as per the Islamic Shari’ah principles and offers Takaful insurance services in Kuwait. The company provides Islamic insurance in various segments such as marine & aviation, motor vehicles, fire and general accident, life and health. The ownership structure of Al Safat Takaful has changed, and the major shareholders of the company are now; Kuwait Finance & Investment Company (36.353 per cent), Securities Group (19.724 per cent), Fuad Al Ghanim & Sons Companies (19.370 per cent). Al Safat Takaful is regulated by the Ministry of Commerce & Industry (Insurance Department). In January 2011, CSR assigned Al Safat Takaful an IFSR rating of "BB" and a national scale rating of "BBBkw" with a stable outlook.

CPI Financial