The ratings reflect the company’s strong business profile, excellent risk-adjusted capitalisation and track record of robust operating performance. Offsetting rating factors are the company’s low, but improving, level of premium retention and high investment concentration within the group.

Damana has a strong regional franchise in the Middle East, with an established presence in Bahrain, the United Arab Emirates, Oman and Kuwait. The company also has a broader profile, via its affiliates and sister companies, in Saudi Arabia, Yemen and Lebanon. Whilst benefiting from regional diversification, the company is heavily concentrated in the medical division, particularly business sourced through its strategic relationship with Cigna Corporation (Cigna) (United States).

Damana has a relatively low overall premium retention level of 16.8 per cent, driven by the company taking a relatively small share of its Cigna-related business. Over the next few years, premium retention is expected to increase as Damana assumes higher retention on this business. Unaudited figures for the first quarter of 2015 show evidence of this strategy, with a sharp increase in premium retention.

Damana maintains excellent risk-adjusted capitalisation, benefitting from low underwriting leverage and a strong reinsurance panel to support the high outward reinsurance cessations. Capital requirements are largely driven by Damana’s investment profile, which includes a group treasury account. The group treasury account generates a good guaranteed rate of return and is deposited with Damana’s ultimate parent, Mawarid Holding Company (Mawarid Group) (Saudi Arabia). However Damana has limited control or oversight over the investments supporting the deposit. A.M. Best notes that despite the significant concentration in the group treasury account, the company does maintain a sufficient level of liquidity. Damana’s capitalisation is expected to remain strong through good internal capital generation and by maintaining a sufficient buffer for strategic initiatives over the next few years.

Damana has demonstrated robust underwriting profitability in recent years, producing solid combined ratios below 85 per cent, whilst growing premium revenue at an average of 34 per cent over the past five years. The strong underwriting is supported by good investment yields, which have averaged approximately 10.3 per cent over the past five years. Going forward, the company’s underwriting performance is expected to remain stable with investment income continuing to augment underwriting profits.