AM Best has noted a decline in The Qatar General Insurance and Reinsurance Company’s (QGIRCO) operating performance and revised its outlook from stable to negative.
The ratings agency also affirmed QGIRCO’s Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-”.
The group’s operating performance generated a five-year average return on equity of 8.6% between 2014 and 2018, and was driven principally by returns derived from its investment operations.
AM Best adds that QGIRC’s earnings have demonstrated its vulnerability to Qatari real estate markets, with notable volatility driven by adverse fair value movements.
While the group has implemented initiatives to improve its operating performance, a level of execution risk still exists and is encumbered further by the group’s strategic expansion into selected global reinsurance markets.
Technical performance experienced “partial improvement” in recent years following remedial action taken to reduce the company’s loss ratio; however, AM Best notes that rising expenses have offset this improvement.
During the first nine months of 2019, QGIRC reported materially reduced net profits of QAR 6 million, compared with QAR 70 million in the same period of 2018, following a series of large loss events and adverse fair-value movements.
For the first nine months of 2019, QGIRC’s combined ratio exceeds 100%. Given the adverse valuation trends in the Qatari real estate market, and QGIRC’s asset exposures, further downward pressure on net profits is expected by AM Best.