CREDIT ANALYSIS REPORT

INTERNATIONAL GENERAL INSURANCE COMPANY LIMITED

Report ID 605285 Popularity 191 views 4 downloads 
Report Date Oct 2020 Product  
Company / Issuer International General Insurance Company Limited Sector Insurance Company
Price (RM)
Normal: RM500.00        
  Add to Cart
Rationale
MARC has affirmed its insurer financial strength rating of AA+ with a stable outlook on Bermuda-based International General Insurance Co. Ltd. (IGI). The rating is based on Malaysia’s national scale. 

The affirmed rating is mainly driven by IGI’s well-diversified underwriting portfolio across business lines and geographies and a strong capitalisation level to support growth. These strengths are underscored by a prudent approach to reserving policy. Key moderating factors are IGI’s modest size as reflected by a total asset size of US$1.05 billion as at end-2019 and the potential rise in investment risk arising from the impact of the COVID-19 pandemic.

IGI is a specialty insurer with gross written premiums (GWP) standing at US$99.2 million as at end-1Q2020. We note that IGI has continued to record strong growth in recent years, registering a 15.8% y-o-y increase in 2019 and 24.0% y-o-y for 1Q2020. The growth was mainly in the casualty line, which accounted for 33.2% of GWP, followed by onshore and offshore energy lines at 20.6% and property at 13.2% as at end-2019. Given that IGI policies normally do not cover non-physical damage from business interruption coverage, we understand that it has not been materially affected by the impact from the COVID-19 pandemic. For 2020, IGI expects to register steady underwriting growth, potentially gaining some traction in the US property insurance market following a business combination of its parent, International General Insurance Holdings Limited (IGIH) which is registered in Dubai International Financial Centre (DIFC), with US-based Tiberius Acquisition Corporation (Tiberius), a special purpose acquisition corporation listed on the Nasdaq Capital Market (Nasdaq).

The business combination has resulted in the formation of a new holding company, Bermuda based International General Insurance Holdings Ltd (IGIC), which took over the listing status of Tiberius on the Nasdaq. The Jabsheh family, founders of IGI, continues to hold a strategic 29.4% interest in IGIC. There has been no change in IGI’s group operations from the business combination which resulted in an additional USD$41 million in capital that would support its growth. We view IGI’s strong capital base as a buffer to absorb any impact in the event of business disruptions due to the COVID-19 pandemic. Its capital position is reflected by a regulatory solvency ratio of 243% as at end-2019 (2018: 287%), which suggests large headroom against a more severe situation. IGI possesses a highly-experienced management team with an average 32 years of experience in insurance, reinsurance and capital markets; its underwriting personnel hail from different countries, which implies knowledge on services and products in their respective countries. 

During 1Q2020, IGI experienced unrealised losses of US$16.5 million on its investments and foreign exchange due to volatile market conditions. We note that the markets have recovered to some extent in recent months and has minimally impacted IGI’s reserves. Due to the pandemic, some operational risk could increase arising from potential delays in investigations and settlements due to a lack of accessibility to affected areas. For 2019, net combined ratio rose to 92.1% (2018: 87.3%) on higher claims. Net profit was higher at US$32.6 million (2018: US$28.0 million) supported by the growth of investment income oto US$13.3 million (2018: US$10.1 million). IGI recorded a higher return on equity of 9.7% for the year (2018: 8.9%). 

IGI continues to maintain healthy cash and short-term deposits of US$312 million or 51.6% of the insurer’s investment portfolio. Meanwhile, 35.0% of the investment portfolio comprises a relatively high quality fixed-income securities as at end-2019. IGI adopts a conservative approach to investment with bonds with the highest rating comprising 21.3% (2018: 1.4%) while non-rated bonds made 2.1% (2018: 3.9%) of its fixed-income portfolio. Its solid liquidity position is reflected by its liquid assets-to-net technical reserves ratio of 141.3% (2018: 141.0%).

Major Rating Factors

Strengths
Well-diversified underwriting portfolio;
Strong capitalisation and liquidity; and
Experienced management team.

Challenge/Risk
Moderate size; and
Operation and investment risk.



Related