AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of Saudi Arabian Insurance Company B.S.C. (c) (Damana) (Bahrain).

The Credit Ratings (ratings) reflect Damana’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and marginal enterprise risk management (ERM). The ratings also factor in the neutral impact from Damana’s ultimate parent, Mawarid Holding Company.

The revision of the outlooks to stable from negative follows corrective actions initiated by management, which AM Best expects to lead to more stable operating performance over the short-to-medium term.

Damana’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which was at the very strong level as at year-end 2023, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best expects Damana's BCAR scores to recover substantially in 2024. Damana has a robust liquidity position, with the ratio of cash and deposits to net technical provisions equal to 170% at year-end 2023. Whilst the company’s previous dependence on reinsurers has partially declined, it remains reliant on reinsurance for high value risks, which is a common trait in the region. Credit risk is minimised by a reinsurance panel of sound credit quality.

Damana’s operating performance is viewed as marginal. In the last five years (2019-2023), Damana generated combined ratios in excess of 120%, peaking in 2021 at 148.2% (as calculated by AM Best). The poor underwriting results are reflective of considerable expense strain arising from its operating model and substantially reduced business scale. Underwriting results in 2023, and the first half of 2024, show a steady improvement against the company’s poor performance in 2021 and 2022, driven largely by a reduction in its expense ratio. Investment returns were historically driven by Damana’s holdings in a group treasury account, which generated high guaranteed returns. The group treasury account was fully liquidated in 2023, and therefore prospective investment returns are likely to be impacted.

Damana reported insurance service revenue of BHD 19.4 million in 2023, an increase of 21.0% compared with the previous year. This follows a contraction in premiums in 2021, which was in part attributable to regulatory restrictions imposed by the Central Bank of Bahrain on the company’s operations in Bahrain in the second half of the year. This restriction was lifted in December 2021, resulting in a return to growth in 2022. AM Best expects further revenue growth in 2024; however, acknowledges the challenging and competitive conditions in Damana’s core markets of Bahrain, the United Arab Emirates, Oman and Kuwait.

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Anna Sheremeteva Financial Analyst +44 20 7397 6264 anna.sheremeteva@ambest.com Ben Diaz-Clegg Associate Director, Analytics +44 20 7397 0293 ben.diaz-clegg@ambest.com Christopher Sharkey Associate Director, Public Relations +1 908 882 2310 christopher.sharkey@ambest.com Al Slavin Senior Public Relations Specialist +1 908 882 2318 al.slavin@ambest.com