AM Best affirms Al Fujairah National Ins Company rating, outlook negative

Ins.-focused ratings agency AM Best affirmed Al Fujairah National Ins Company (AFNIC)’s financial strength rating at B++,and the company’s long-term Issuer credit rating at bbb, according to a press release. Both ratings were given a negative outlook.

The rationale: AFNIC's ratings demonstrate the company's robust balance sheet strength, evaluated as strong by AM Best. The ratings also reflect AFNIC's “strong operating performance, limited business profile and marginal enterprise risk management”.

The credit ratings also factor in the support from AFNIC's main shareholder, the Government of Fujairah-Department of Industry and Economy, which owns over 80% of AFNIC. The entity has repeatedly backed AFNIC through capital injections and allowed the company to accumulate capital through bonus shares instead of liquidity distributions.

Why the negative outlook? AFNIC has been reporting “loss making operating results” since 2022. At the end of 2022, the company reported a net loss of AED 14.4 and an additional AED 13.4 mn loss in 9M 2023. These losses are mainly due to poor technical performance, which was partially counteracted by positive investment returns. The reduction in earned premiums, and many large losses have strained AFNIC’s expenses base. These challenges are straining the rating agency’s operating performance assessment.