9 December 2012
London, 04 December 2012 -- Moody's Investors Service has today assigned a first-time Ba1 insurance financial strength rating (IFSR) to T'azur Takaful Insurance Company K.S.C.C. ("T'azur"), based in Kuwait. The rating outlook is stable.
T'azur is a Takaful insurer based in Kuwait and was established in 2007. It writes a mix of non-life, health and takaful life insurance. Moody's Ba1 rating reflects T'azur's good market position within the domestic Takaful market, with a market share of around 8% and 5th position in terms of Takaful contributions. As at year end 2011, T'azur's market share is a more modest 1.3% of the total Kuwaiti insurance market (i.e. conventional and Takaful insurance). T'azur has however grown strongly since inception, with growth rates averaging 44% in the last 2 years. The rating also benefits from the relatively lower-risk investment portfolio compared to its Kuwaiti peers, with the majority of investments held as Wakala receivables.
However, offsetting this is the challenge T'azur faces in continuing to increase revenues to improve the current expense ratio, a challenge facing many relatively new insurers in Kuwait, with 2011 gross contributions of KD 2.9m (US$10.6mn) leading to an expense ratio of 50% on a Moody's basis. In addition, T'azur's profitability remains modest, with combined ratios averaging 113% over the last 3 years and a 2009-2011 3 year average RoC of around 1%. T'azur also maintains a deficit in the policyholders' fund, standing at KWD0.7mn (US$ 2.7mn) at year end 2011, and this deficit has risen since inception.
"The stable rating outlook reflects T'azur Takaful's good position in the Kuwait Takaful market, which should enable it to participate in the insurance premium growth arising from the Kuwaiti government's extensive economic stimulus package for the next few years," says David Masters, a Moody's Vice President -- Senior Analyst and lead analyst for T'azur.
According to Moody's, the rating could be upgraded if the profitability, both within the policyholders' fund and on a consolidated basis, were to improve to a RoC consistently above 5% and/or if there were significant improvements in the policyholder deficit position. Further developments that might lead to positive rating pressure include a greater diversification in the investment portfolio away from Wakala receivables and into highly rated investment deposits. Conversely, the rating may come under negative pressure if there is a deterioration in the profitability, either through negative RoC, or through a significant deterioration in the underwriting profitability of T'azur. Further negative pressure could arise in the event of a material increase in investment exposure to real estate and/or equities.
The following rating was assigned with a stable outlook:
T'azur Takaful Insurance Company K.S.C.C. Insurance Financial Strength Rating of Ba1
The methodologies used in this rating were Moody's Global Rating Methodology for Property and Casualty Insurers published in May 2010 and Moody's Global Rating Methodology for Life Insurers published in May 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
Based in Kuwait, T'azur Takaful reported a consolidated net income of KWD0.2million in 2011, compared to the net loss of KWD0.2million in 2010. T'azur Takaful's total shareholders' equity (excluding policyholders' fund) slightly improved to KWD6.1million at year-end 2011 from KWD5.9million at year-end 2010, although the deficit of policyholder fund increased to KWD0.7million in 2011 from KWD0.4million in 2010. Gross contributions increased to KWD 2.9million in 2011 from KWD2.0million recorded in 2010.