SALAMA/Islamic Arab Insurance Co. P.S.C.

The negative CreditWatch placement reflects our concerns relating to the audit qualifications, regulatory solvency deficit, and potential volatility of capital adequacy due to the merger. We may affirm the ratings if SALAMA makes progress toward resolving these issues, failing which, we may lower the ratings by one or more notches. Real GDP growth in the UAE of 3%-5% per year over 2022-2023. GWP growth in the UAE insurance market will likely remain relatively modest in 2022, due to ongoing high competition and the absence of any new mandatory cover. SALAMA is the largest Sharia-compliant (takaful) insurer in the UAE. It has the largest portfolio of life business among local listed insurers and ranked seventh among the 28 listed UAE insurers

...S&P Global Ratings expects that SALAMA will maintain its '###' level capital adequacy, as per our capital model. SALAMA's capitalization exceeds our '###' benchmark, which is a key rating strength. In our base case, we expect SALAMA will maintain its risk-based capital adequacy at the '###' benchmark over the next two years supported by positive net income projections. However, a potential merger with Takaful Emarat, another United Arab Emirates (UAE)-based insurer, along with unresolved audit qualifications could pressure SALAMA's capital adequacy and possibly lead to a negative rating action. We expect SALAMA will maintain its operating performance in 2022-2024. SALAMA has consistently improved its operating performance and has a five-year average (2017-2021) net combined ratio of about 95% (below 100% indicates an underwriting profit). We expect SALAMA will maintain its underwriting discipline and continue to report net combined ratios in the mid-90% range over the next two years. We...

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