Moody's Investors Service has assigned a Baa2 insurance financial strength rating (IFSR) to Buruj Cooperative Insurance Company (Buruj), based in Saudi Arabia. The outlook is stable.
Established in 2010, Buruj is a mid-sized insurer in Saudi Arabia and writes most lines of non-life insurance, together with health and some life insurance.
Moody's Baa2 rating reflects (i) Buruj's mid-sized position in the domestic market, ranking #18 in 2015, with a market share of around 1 percent in Saudi Arabia and overall total gross written premiums of SR447 million ($119 million) in 2015. Buruj is establishing a reputation for its good service, particularly within medical and motor insurance; (ii) the company's relatively strong asset quality, with high risk assets (HRA) representing 49 percent of consolidated shareholders' and policyholders' capital at YE 2015; (iii) Buruj's improved recent profitability with a 18.1 percent return on capital (ROC) in 2015; and (iv) improved capitalization post the issuance of shares via a rights issue in 2015, increasing share capital by 92 percent to SR250 million.
Moody's assistant vice president — Analyst, Mohammed Londe said that "Buruj's prudent management has led to consistent improvements in its profitability and equity levels supported by an invested asset quality stronger than its rated GCC peers."
However these strengths are somewhat offset by the significant concentration to the motor and medical lines of business as well as geographical concentration to Saudi Arabia. Furthermore, though capitalization has improved with gross underwriting leverage (GUL) of 3.2x at YE 2015 compared to 6.2x at YE 2014, GUL is still higher than other rated GCC peers who often have GUL of below 2x.
Moody's further notes that Buruj's historic profitability has been weak with a 5 year average ROC of 1.7 percent, suppressed by the losses incurred in 2011 and 2012. However improvements in underwriting profitability over the last three years, with an average combined ratio (COR) of 93.6 percent between 2013 and 2015, along with stable investment returns has driven a strong 3-year ROC of 15.4 percent.
Established in 2010, Buruj is a mid-sized insurer in Saudi Arabia and writes most lines of non-life insurance, together with health and some life insurance.
Moody's Baa2 rating reflects (i) Buruj's mid-sized position in the domestic market, ranking #18 in 2015, with a market share of around 1 percent in Saudi Arabia and overall total gross written premiums of SR447 million ($119 million) in 2015. Buruj is establishing a reputation for its good service, particularly within medical and motor insurance; (ii) the company's relatively strong asset quality, with high risk assets (HRA) representing 49 percent of consolidated shareholders' and policyholders' capital at YE 2015; (iii) Buruj's improved recent profitability with a 18.1 percent return on capital (ROC) in 2015; and (iv) improved capitalization post the issuance of shares via a rights issue in 2015, increasing share capital by 92 percent to SR250 million.
Moody's assistant vice president — Analyst, Mohammed Londe said that "Buruj's prudent management has led to consistent improvements in its profitability and equity levels supported by an invested asset quality stronger than its rated GCC peers."
However these strengths are somewhat offset by the significant concentration to the motor and medical lines of business as well as geographical concentration to Saudi Arabia. Furthermore, though capitalization has improved with gross underwriting leverage (GUL) of 3.2x at YE 2015 compared to 6.2x at YE 2014, GUL is still higher than other rated GCC peers who often have GUL of below 2x.
Moody's further notes that Buruj's historic profitability has been weak with a 5 year average ROC of 1.7 percent, suppressed by the losses incurred in 2011 and 2012. However improvements in underwriting profitability over the last three years, with an average combined ratio (COR) of 93.6 percent between 2013 and 2015, along with stable investment returns has driven a strong 3-year ROC of 15.4 percent.
