MARC has affirmed its insurer financial strength rating of AA+ with a stable outlook on International General Insurance Co Ltd (IGI).

The rating affirmation is driven by IGI’s healthy capitalisation, sound liquidity profile and a well-diversified underwriting portfolio that has been able to withstand the impact of catastrophic events in 2017. IGI is a specialty insurer with total assets of US$935 million as at end-2018. The rating is moderated by IGI’s moderate size and fairly limited track record. The stable outlook assumes that IGI will continue to balance its prudent underwriting policies with business growth and earnings generation.

IGI’s insurance portfolio is well-diversified across geographies and business lines, of which the onshore and offshore energy lines accounted for a combined 27.0% of gross written premiums (GWP) in 2018, followed by casualty (24.4%) and property (13.5%). During the year, GWP grew 9.5% y-o-y to US$301.6 million, supported by strong demand for new products under its casualty line and improved premium rates in most business lines resulting from a decline in insurance capacity following large natural catastrophic events - hurricanes Maria and Irma as well as two earthquakes in Mexico - in 2017. The higher GWP, coupled with a decrease in net claim expenses, led to a sharp earnings rebound to US$29.0 million from US$10.4 million in 2017.

For 2018, IGI’s net incurred loss ratio improved to 47% (2017: 60%) as operating conditions normalised subsequent to the losses incurred due to the aforementioned catastrophic events. IGI has continued to manage its underwriting risks through reinsurance protection. Its reinsurance rate of 33.0% of premiums ceded out in 2018 allowed it to pass on US$125.8 million of its gross claims to reinsurers, such that losses net of reinsurance totalled US$85.3 million (2017: US$158.7 million; US$93.5 million).

IGI continues to maintain large holdings of cash and short-term deposits, which comprised US$260 million, or 51.7% of the insurer’s investment portfolio as at end-2018 (2017: 43.0%). This was followed by a fixed-income portfolio comprising relatively high-quality securities (2018: 32.9%, 2017: 38.9%). In terms of fixed-income securities, credit quality remained sound in 2018, with the allocation to AAA and AA-rated bonds comprising 27.6% of the fixed-income portfolio (2017: 23.3%), and A and BBB-rated bonds at 68.3% (73.7%).

MARC notes that the bulk of IGI’s investment portfolio is in cash and debt securities with maturities of less than a year (2018: 68%; 2017: 57%). The insurer’s large holdings of cash and maturing positions provide it with the flexibility to take advantage of investment opportunities. It also contributes to IGI’s solid liquidity position, as indicated by the liquid assets-to-net technical reserves ratio of 141.0% (2017: 141.8%).

IGI’s strong capital position as reflected by a solvency ratio of 287% as at end-2018 (2017: 251%) moderates concerns on financial flexibility given its shareholding structure that remains majority-owned by individuals. IGI maintains a strong pool of underwriting talent; its management and operational functions are carried out by its sister company based in Amman, Jordan.

Contacts:
Douglas De Alwis, +603-2717 2965/ douglas@marc.com.my;
Mohd Izazee Ismail, +603-2717 2947/ izazee@marc.com.my.