LONDON: AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Dubai Insurance Company (DIC), UAE. The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect DIC’s balance sheet strength, which AM Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.[the_ad id=”32940″]DIC’s balance sheet strength is assessed as very strong, underpinned by risk-adjusted capitalisation at the strongest level, with Best’s Capital Adequacy Ratio (BCAR) scores comfortably in excess of 50% at the 99.6% confidence level. The company’s ability to retain earnings, strong liquidity, and prudent reserving that incorporates buffers over the actuarial best estimate, further support the balance sheet strength.
An offsetting rating factor is the heightened volatility in capital and surplus caused by movements in the fair value of DIC’s equity holdings, although the company maintains an adequate capital buffer to absorb these fluctuations.
The balance sheet strength assessment also factors in DIC’s high dependence on reinsurance, as evidenced by a retention ratio of approximately 21% in 2018. The associated counter-party risk is mitigated partially by the use of a strong reinsurance panel.
Dubai Insurance Company (DIC) has enhanced its market position successfully in a highly competitive market without compromising technical profitability. In 2018, DIC grew its gross written premium (GWP) by circa 12% to AED 531.9 million benefiting from the introduction of the new Ministry of Human Resources and Emiratisation (MOHRE) insurance product, which came in force in October 2018, for which DIC is the consortium leader.
Historically, DIC’s business mix was concentrated primarily in motor and medical lines of business; however, the introduction of the MOHRE product has led to additional diversification in the company’s product offering. Going forward, the MOHRE product is expected to account for approximately 40% of GWP, with medical and motor business remaining material lines.
The company has a track record of solid operating performance as demonstrated by an excellent five-year (2014-2018) weighted average combined ratio of 75.9%. DIC reported a technical profit of AED 43.2 million in 2018, compared with AED 28.6 million in 2017.
The introduction of the MOHRE product has contributed positively to the company’s technical earnings. DIC’s performance benefits from higher inward commissions as part of its role as the consortium’s leader. AM Best expects prospective underwriting performance to remain strong, although exposure to equities could introduce some volatility in total comprehensive income.