LONDON--(BUSINESS WIRE)--A.M. Best has upgraded the issuer credit rating to “bbb+” from “bbb” and affirmed the financial strength rating (FSR) of B++ (Good) of Dubai Insurance Company (PSC) (DIC) (United Arab Emirates). The outlook for the ICR has been revised to stable from positive, while the outlook for the FSR remains stable.
The upgrade reflects DIC’s continued strong operating results, good franchise within the UAE and developing enterprise risk management (ERM) framework. The ratings also reflect its strong risk-adjusted capitalisation and sound reinsurance protection. An offsetting factor is DIC’s concentrated investment profile.
DIC has achieved an excellent five-year weighted average combined ratio of 76% while operating in the highly competitive UAE market, with all lines of business producing a technical profit in 2013. Return on equity over the same period has averaged 8.9% with underwriting performance driving profitability.
Risk-adjusted capitalisation remains strong in 2014, with DIC’s capital position boosted by an AED 114 million (USD 31 million) unrealised fair value gain on equity investments. The company’s level of risk-adjusted capitalisation is supported by low underwriting leverage and sound reinsurance protection.
DIC continues to enhance its risk management framework, developing the use of a capital model and performing stress-testing on its business plans. The company has a concentrated investment profile, with material exposure to UAE financial sector equities, which creates volatility in risk-adjusted capitalisation. However, DIC’s capital position is sufficiently strong to absorb fluctuation in the value of its equity holdings.
DIC is well positioned at its current rating level. Positive rating pressures can arise through further embedding and integration of ERM and strengthening in the company’s market franchise. A prolonged deterioration in its operating performance or insufficient improvements in ERM could add negative pressure to the ratings.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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