International credit ratings agency Moody’s has assigned an A3 insurance financial strength rating (IFSR) to Saudi Re For Cooperative Reinsurance Company (Saudi Re). The outlook for Saudi Re is stable.
Saudi Re, based in Riyadh, Saudi Arabia, writes reinsurance across the Middle East, Africa, and Asia markets, and is affiliated with Lloyd’s.
According to Moody’s, the reinsurer’s ISFR of A3 reflects its strong brand and market position in its home market of Saudi Arabia. It enjoys preferential position in the Saudi market due to a right of first refusal on a portion of premiums ceded by primary carriers. Moody’s also cited its good capital adequacy, strong financial flexibility with non-existent leverage, and good access to capital markets in Saudi Arabia due to being listed on the domestic stock exchange.
Despite being smaller than most global reinsurers, Saudi Re’s diversified lines of business and scale are sufficient to allow it to provide meaningful levels of capacity to clients in its chosen markets, which exclude most developed markets wrought by intense competition. Its strong relationships and detailed local knowledge also strengthen its position.
However, its profitability has been weak and volatile historically, both overall and in underwriting terms. It has a five-year average return on capital (ROC) of -2.4% and an average combined ratio (COR) of 103.6 % between 2013 and 2017.
“We note that over the past three years profitability has improved as a result of growing sophistication in risk management, including underwriting actions taken to reduce exposure to under-performing business,” Moody’s said. “Three-year average ROC was 0.6% and three-year average COR was 94.8%, result levels which we expect Saudi Re will maintain in the future.”
