AM Best Upgrades and Withdraws Credit Ratings of Union Insurance Company P.J.S.C.
The ratings reflect Union's balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The rating upgrades reflect the demonstrated improvements in Union's corporate governance, internal controls and risk management practices. The company's management has taken corrective actions in recent years to reduce balance sheet risk and improve regulatory solvency metrics. As at year-end 2024, the company continues to report a stable solvency coverage ratio of 143% (144% at year-end 2023), which remains in excess of 140% following the first three months of 2025. AM Best expects Union to manage its capital position prudently to maintain a comfortable buffer above regulatory solvency requirements.
Union's very strong balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, as measured by Best's Capital Adequacy Ratio (BCAR), at the strongest level in 2024 and is expected to remain at this level prospectively. The assessment also incorporates the company's reduced exposure to investment risk, following management's derisking of the equity and real estate portfolios since 2021, with proceeds reinvested largely in cash and deposits. A partially offsetting factor is Union's high dependence on reinsurance, albeit the associated elevated credit risk is managed through the use of a well-rated reinsurance panel.
Union has a track record of adequate operating performance, generating profits in three of the past five years (2020-2024). Union reported a profit of AED 38.3 million (USD 10.4 million) in 2024, driven by positive underwriting and investment returns, with continued profits of AED 13.1 million following the first three months of 2025. AM Best expects greater stability in operating results following the derisking of the asset portfolio and continued focus on underwriting profitability.
Union retains its position as a mid-tier composite insurer in the UAE market, where in 2024 it ranked 15 th, as measured by insurance revenue of the listed national insurance companies. Despite a well-balanced distribution network, insurance revenue is concentrated in the highly competitive UAE market, where the company originates the majority of its business. Union's top line contracted in 2024, the result of Union's exit from the Oman's life insurance market and its selective underwriting approach. The company has outlined several growth opportunities to compensate partially for lost revenue.
This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.
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