Stable Outlook Reflects Strong Balance Sheet Capitalization, Improved Underwriting Performance and Government Shareholder Support
AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Al Fujairah National Insurance Company PJSC (AFNIC), a United Arab Emirates-based insurance company. The outlook for both ratings remains stable, reflecting the company’s strong balance sheet strength, adequate operating performance, and continued support from its majority shareholder, the Government of Fujairah – Department of Industry and Economy.
The rating affirmation highlights AFNIC’s financial position and its progress in addressing underwriting challenges experienced in previous years. The assessment also considers the company’s limited business profile, appropriate enterprise risk management practices, and exposure to investment concentration risks.
According to AM Best, AFNIC benefits from a strong balance sheet, supported by risk-adjusted capitalization that reached the strongest level under Best’s Capital Adequacy Ratio (BCAR) measure at year-end 2025. The company’s capitalization has improved compared with the previous year, following measures intended to strengthen the resilience of its financial position, particularly through partial de-risking of its investment portfolio.
However, investment concentration remains an important consideration. AFNIC’s equity portfolio continues to be largely concentrated in a single strategic holding, exposing the company to elevated investment risk despite the actions taken to improve its overall balance sheet resilience.
The ratings also reflect the company’s recovery in underwriting performance during 2025, following several years of losses. Premium rate increases, remedial underwriting measures, and the introduction of a new medical insurance product in the Northern Emirates contributed to the improvement. While the motor insurance segment remained under pressure in 2025, performance during 2026 has shown signs of improvement.
AFNIC’s position in the UAE insurance market is supported by its established brand recognition in the Northern Emirates and preferential access to government-originated business in the Emirate of Fujairah. Nevertheless, its relatively modest market share and geographic concentration continue to constrain its business profile.
AM Best Affirms Financial Strength and Issuer Credit Ratings
AM Best’s affirmation of AFNIC’s Financial Strength Rating of B++ (Good) and Long-Term Issuer Credit Rating of “bbb” (Good) reflects its assessment of the company’s financial capacity, operating performance, business position, and risk management.
The Financial Strength Rating evaluates an insurer’s ability to meet its ongoing insurance policy and contractual obligations. The Long-Term Issuer Credit Rating provides an assessment of the company’s broader creditworthiness and ability to meet its financial commitments.
The stable outlook indicates that AM Best expects the factors supporting the ratings to remain broadly consistent over the relevant outlook period. It does not guarantee that the company’s financial performance will remain unchanged, but it reflects the rating agency’s current assessment of the balance between AFNIC’s strengths and risks.
Several elements support the affirmation. The company’s risk-adjusted capitalization remains strong, underwriting performance improved significantly in 2025, and investment income continues to contribute to operating results. In addition, the government shareholder’s majority ownership provides an additional source of rating support.
At the same time, AM Best’s assessment recognizes that AFNIC operates in a competitive insurance market and remains exposed to investment concentration risk. The company’s future performance will depend in part on its ability to sustain underwriting improvements, manage investment exposures, and maintain sufficient capitalization as its business grows.
Strong Balance Sheet Supported by Capital Adequacy
AFNIC’s balance sheet strength is a key component of its affirmed ratings. AM Best assesses the company’s balance sheet strength as strong, with its risk-adjusted capitalization reaching the strongest level under the BCAR measure at year-end 2025.
Best’s Capital Adequacy Ratio is used by AM Best to evaluate an insurer’s capital position relative to the risks associated with its business. The assessment considers whether an insurer has sufficient capital to support its underwriting activities, investment portfolio, and other financial exposures.
AFNIC’s BCAR scores improved compared with the previous year, reflecting actions taken to enhance the resilience of its balance sheet. One of the principal measures involved partially reducing risk within the investment portfolio.
Investment portfolio adjustments can be important for insurers because investment assets help support policyholder obligations and contribute to overall financial stability. The nature, concentration, and volatility of those assets can influence an insurer’s exposure to market movements and potential losses.
Although AFNIC’s risk-adjusted capitalization improved, its equity investments remain concentrated largely in a single strategic holding. This concentration means that changes affecting that investment could have a significant impact on the company’s financial position.
A concentrated portfolio may expose an insurer to risks that are not fully captured by overall capital levels alone. For this reason, continued attention to diversification, investment monitoring, liquidity, and risk management remains important.
AFNIC’s strong balance sheet assessment therefore reflects a combination of capital adequacy and measures taken to strengthen financial resilience, while recognizing that investment concentration continues to represent a material risk factor.
Government Shareholder Provides Additional Rating Support
Another factor supporting AFNIC’s ratings is its ownership structure. The Government of Fujairah – Department of Industry and Economy holds more than 80% of the company’s shares, making it the majority shareholder.
AM Best’s rating assessment reflects enhancement from this government ownership. The relationship is an important consideration because the shareholder’s involvement may provide strategic and institutional support to the insurer.
AFNIC also benefits from its established presence in the Emirate of Fujairah and its access to government-originated business. These connections help distinguish the company within the UAE insurance market, where many insurers compete for customers across multiple lines of business.
Government ownership can contribute to an insurer’s market position and business relationships, although it does not eliminate the risks associated with underwriting, investment management, or competitive pressures.
The rating affirmation indicates that AM Best continues to consider the shareholder relationship a meaningful supporting factor in its assessment of AFNIC’s credit profile.
Underwriting Performance Recovers Following Several Challenging Years
AFNIC’s operating performance has faced challenges since 2021, AM Best when its track record of consistent technical profits was interrupted. The company subsequently reported underwriting losses in each year through 2024.
Underwriting performance is a central measure of an insurer’s ability to generate profitable results from the premiums it collects after accounting for claims, related expenses, and other insurance costs. Sustained underwriting losses can place pressure on earnings and make an insurer more dependent on investment income to support overall profitability.
Under IFRS 17 reporting, AM Best calculated AFNIC’s weighted average net-net combined ratio at approximately 102% for the four-year period from 2022 through 2025.
The combined ratio compares relevant claims and expenses with insurance revenue or premiums under the applicable calculation methodology. A ratio above 100% generally indicates that underwriting costs exceed the related insurance income, while a ratio below 100% indicates an underwriting profit before investment results.
AFNIC’s four-year weighted average ratio of approximately 102% therefore reflects the underwriting challenges experienced during the period. However, the company’s performance improved materially in 2025, when the net-net combined ratio declined to 92%.
The improvement followed remedial actions that included premium rate increases and the launch of a new medical insurance product in the Northern Emirates. These measures helped strengthen underwriting performance and contributed to the company’s return to a more favorable technical result.
Premium adjustments can help insurers respond to rising claims costs and changing risk conditions. However, insurers must balance adequate pricing with competitive market conditions and customer demand. New products can also support growth by expanding the range of coverage available to customers, although their long-term contribution depends on pricing discipline and claims experience.
AFNIC’s 2025 combined ratio indicates that the company made progress in restoring underwriting profitability. Sustaining that progress will be important for the insurer’s future earnings quality and financial resilience.
Motor Insurance Performance Shows Signs of Improvement
The motor insurance segment remained an area of weakness in 2025, according to AM Best’s assessment. However, performance to date in 2026 has shown improvement.
Motor insurance is an important part of many non-life insurance markets, but profitability can be affected by claims frequency, repair costs, vehicle replacement expenses, pricing competition, and changes in the severity of accidents.
For insurers, maintaining profitable motor underwriting requires a careful balance between attracting customers and charging premiums that adequately reflect the risks covered. If premiums fail to keep pace with claims and operating expenses, underwriting margins can deteriorate.
AFNIC’s improvement in motor performance during 2026 provides a positive development following the segment’s weaker results in 2025. Nevertheless, the sustainability of this improvement will depend on claims trends, pricing measures, underwriting standards, and competitive conditions.
The motor segment’s performance is particularly relevant to AFNIC’s wider results because motor business contributed to the company’s insurance revenue growth in 2025.
Continued monitoring of claims costs and the effectiveness of remedial measures will be important as the company seeks to maintain its improved combined ratio and support its overall operating performance.
Investment Returns Continue to Support Earnings
In addition to its underwriting activities, AFNIC benefits from investment returns that contribute to its overall operating performance. AM Best noted that investment results have been positive, although volatile.
Insurance companies generally invest funds generated through premiums and other sources to support future policyholder obligations and earn additional income. Investment returns can therefore play a significant role in an insurer’s overall profitability.
However, investment income is influenced by market conditions, asset allocation, interest rates, equity prices, and the performance of individual holdings. Volatility in investment results can create fluctuations in earnings even when the underlying insurance business remains relatively stable.
For AFNIC, investment returns continue to support operating performance, but the concentration of its equity portfolio in a single strategic holding remains a risk.
The company’s partial de-risking measures have improved its capital adequacy assessment, according to AM Best. Further effective management of investment exposures could help strengthen the relationship between investment performance and overall financial stability.
The insurer will need to balance the potential benefits of investment income with the importance of preserving capital and managing the risks associated with its asset portfolio.
Business Profile Remains Limited
Despite its improved financial position and underwriting performance, AM Best continues to assess AFNIC’s business profile as limited.
The assessment reflects the company’s modest market position and significant geographic concentration. AFNIC operates primarily in the competitive and highly fragmented UAE non-life insurance market, where it accounts for a relatively small share of total market premiums.
A fragmented insurance market can place pressure on pricing, distribution, customer retention, and underwriting discipline. Insurers must compete with numerous providers while maintaining sufficient premium levels to cover claims, expenses, and capital requirements.
AFNIC’s geographic concentration also exposes it to developments affecting the markets in which it operates. Economic conditions, customer demand, claims trends, and competitive activity in the UAE can influence its operating results.
However, the AM Best company maintains certain advantages within this environment. It benefits from preferential access to government-originated business in the Emirate of Fujairah and has established brand recognition in the Northern Emirates.
These characteristics provide AFNIC with a differentiated position relative to its broader market share. Its local relationships and brand presence can support business generation, although they do not eliminate the competitive and geographic limitations identified by AM Best.
Expanding market reach, maintaining customer relationships, and achieving profitable growth could help strengthen the company’s business profile over time. Such progress would need to be supported by sustainable underwriting results and appropriate risk management.
Insurance Revenue Increases 56% in 2025
AFNIC reported insurance revenue growth of 56% in 2025, bringing total insurance revenue to AED 658 million. The increase was driven primarily by growth in the motor and medical insurance segments.
The revenue expansion demonstrates that the company increased the scale of its insurance operations during the year. Growth AM Best across motor and medical business can create opportunities to broaden customer relationships and increase the company’s presence in its principal market segments.
However, revenue growth alone does not determine an insurer’s financial strength. The profitability of the business depends on the relationship between insurance revenue, claims, operating expenses, reinsurance arrangements, and other relevant costs.
AFNIC’s improved net-net combined ratio of 92% in 2025 provides additional context for its revenue growth. Together, the figures indicate that the company expanded its insurance revenue while also improving its underwriting performance during the year.
The challenge moving forward will be to maintain this balance. Rapid growth can increase exposure to claims and other risks if pricing and underwriting standards do not keep pace with the expansion of the portfolio.
The company’s ability to manage growth while preserving underwriting discipline will therefore remain an important consideration for its operating performance and credit profile.
Enterprise Risk Management Supports Financial Resilience
AM Best also considers AFNIC’s enterprise risk management (ERM) to be appropriate.
ERM encompasses the processes an organization uses to identify, assess, monitor, and manage risks across its operations. For insurers, these risks can include underwriting exposures, investment volatility, liquidity requirements, operational challenges, regulatory obligations, and concentration risks.
An effective risk management framework can help insurers identify emerging problems, evaluate the potential impact of adverse developments, and make informed decisions about capital allocation and business growth.
For AFNIC, the AM Best improvement in risk-adjusted capitalization following partial investment portfolio de-risking illustrates the importance of managing financial exposures alongside business expansion.
The company’s continuing investment concentration and its history of underwriting losses also demonstrate why ongoing risk oversight remains necessary.
Maintaining appropriate ERM practices can support more consistent decision-making and help management balance growth opportunities with the need to protect policyholders and preserve financial stability.
AM Best’s decision to affirm AFNIC’s ratings with stable outlooks reflects the rating agency’s assessment of the company’s current financial position, operating performance, and supporting factors.
The insurer enters the period following the affirmation with strong assessed balance sheet strength, improved underwriting performance in 2025, and positive, though volatile, investment returns. Government majority ownership and established relationships in Fujairah also contribute to its rating profile.
At the same time, AM Best several areas remain important to monitor. AFNIC will need to sustain its underwriting improvements following losses reported between 2021 and 2024, maintain progress in motor insurance, and manage investment concentration risk.
The company’s modest market share and geographic concentration also continue to limit its business profile. Although insurance revenue grew significantly in 2025, long-term progress will depend on converting that growth into sustainable, risk-adjusted profitability.
Overall, AM Best’s affirmation recognizes AFNIC’s strong capitalization, improved recent underwriting results, appropriate risk management, and government shareholder support. The AM Best stable outlook reflects the current balance of these strengths and the risks associated with the company’s investments, competitive position, and operating environment in the UAE non-life insurance market.
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