Fitch Ratings has affirmed the Insurance Financial Strength Rating (IFS) of Oman Reinsurance Company SAOG (Oman Re) at “BBB-”. The credit agency indicated that expectations remain stable.

This confirmation reflects Oman Re’s investment risks linked to the credit quality of the Omani sovereignty, the company’s strong profile, its capitalization, and its financial performance.

Fitch believes that the investment and asset risks of Oman Re are closely linked to the credit quality of the Omani sovereign. At the end of 2023, 60% of Oman Re’s total invested assets were term deposits with Omani banks or US dollar-denominated government bonds issued by the Sultanate of Oman, down from 68% in 2022.

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Fitch indicated that Oman Re follows a wise investment strategy with a well-diversified portfolio. The company’s conservative asset allocation is demonstrated by its risky assets to equity ratio (RAR) of 66% in 2023, an improvement from 87% in 2022. This improvement is due to the Omani sovereign rating upgrade in September 2023 and efforts to improve portfolio diversification.

Oman Reinsurance Company has also expanded its operations through its branch in the Qatar Financial Center and is primarily investing new funds in high credit quality assets denominated in foreign currency.

Over the past five years, Oman Re has significantly enhanced its business excellence, operating mainly in the Middle East and North Africa region. Turkey was the largest market in the 2023 reinsurance book, contributing 14%, followed by the United Arab Emirates, Pakistan and Oman.

However, compared to its global peers, Oman Re has a small operating scale, with total reinsurance revenues of OMR42 million (US$111 million) in 2023.

Fitch considers Oman Re’s capital to be supportive of the rating. Based on year-end 2023 data, the reinsurer’s Prism Global model score remained at the lower end of ‘Strong’, consistent with 2022. Target capital pressure stemmed from strong double-digit growth in reinsurance revenue, while equity increased By 8.4%. The capital available to Oman Re is of high quality, and consists mainly of paid-up capital, with a regulatory solvency margin of 214% at the end of 2023.

Fitch believes that the financial performance of Oman Reinsurance Company is strong, which is reflected in the net income return on shareholders’ equity of 8.4% in 2023, up from 7.5% in 2022. The company achieved a net profit after tax of 2.5 million Omani riyals in 2023. , an increase from 2.5 million Omani riyals. $1 million in 2022, supported by strong underwriting and investment results. The combined ratio improved to 88.6% in 2023 from 97.5% in 2022, driven by an improved loss ratio.

Fitch believes that Oman Re’s conservatism practices are prudent and that the adequacy of its reserves is strong, supported by strong actuarial experience and conservative underwriting policies. Most of Oman Re’s work is short-term.

Factors that could lead to a positive rating or rating upgrade include upgrading of the Omani sovereign or Omani banks, reducing exposure to the Omani banking system by significantly rebalancing the investment portfolio of term deposits and other investments across Omani banks, and enhancing the assessment of the company’s profile.

Factors that could lead to a negative rating action or downgrade include a downgrade of Oman’s sovereign rating or ratings of Omani banks and a decrease in capitalization, measured by an FBM Prism score at the lower end of ‘adequate’.

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