CSR assigns BB to Al Safat Takaful Company

09/01/2011 00:00 AST

This is the first time that CSR rates Al Safat. The rating is based on the consolidated financial statements until June 2010.

The ratings reflect Al Safat's adequate capitalisation, improving operating performance and relatively sufficient liquidity position. The company implements a conservative reserve accumulation strategy and relies heavily on reinsurance for its marine & aviation and general accident segments. Al Safat is expanding its insurance business and the company's underwriting performance indicators are improving. The company's rating is however constrained by its small market share of the Gross Premiums Written (GPW) and concentration in the Kuwaiti market. The investment in equities and unlisted funds further adds to the volatility of the company's financial profile. The outlook reflects CSR's view of the continued improvement in the company's insurance underwriting performance.

Al Safat Takaful Insurance Company was established in 2005 according to Shari’ah 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 major shareholders (not less than 10 per cent stake) of the company are; Al Safat Group (28.9 per cent), Al Ghanim Group (12.5 per cent), Al Kharafi Group (10 per cent), Commercial Bank of Kuwait (10 per cent), Investors Group Holding (10 per cent), Kuwait Finance & Investment Company (10 per cent), and Commercial Real Estate Company (10 per cent). This diverse group of prominent investors supports the company's insurance business.

Al Safat Takaful is aiming to improve its market position in the Kuwaiti market which is becoming increasingly competitive with the presence and entrance of Takaful insurers. The company's started underwriting in 2005 and by the end of FY2007, the company's Gross Premiums Written (GPW) has increased to KWD 3.09 million. In FY2008, the GPW increased to KWD 3.86 million registering 19 per cent YoY growth. As of 2008, the Takaful market in Kuwait represents only 16.7 per cent of the overall insurance industry and this percentage continues to increase along with an increase in new Takaful companies joining the market. This indicates an increasing competition in the Takaful market. In FY2009, the GPW witnessed a 31.4 per cent decline which was mainly due to a significant decline (91.2 per cent) in Marine & Aviation premiums.

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