LONDON--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Dubai Insurance Company (PSC) (DIC) (United Arab Emirates). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect DIC’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management.
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 potential 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 relatively high dependence on reinsurance, as evidenced by a retention ratio of approximately 29% in 2017. The associated elevated counter-party risk is, however, mitigated partially by the use of a strong reinsurance panel.
DIC has a track record of solid operating performance as demonstrated by an excellent five-year (2013-2017) weighted average combined operating ratio of 78.4%. The company reported a technical profit of AED 28.6 million (USD 7.8 million) in 2017, compared with AED 23.9 million (USD 6.5 million) in 2016.
DIC has successfully managed to enhance its market position in a highly competitive market without compromising technical profitability, mainly achieved through prudent risk selection and the improvements in claims management processes. A.M. Best expects prospective technical performance to remain stable, although exposure to equities could introduce some volatility in total comprehensive income.
DIC is a mid-tier insurer solely operating in the UAE with gross written premium having increased by 19% to AED 476.4 million (USD 129.7 million) in 2017 and net premiums reaching a modest AED 136 million (USD 37.0 million). DIC’s premium growth in 2017 was driven largely by price increases in its motor book of business, and increased demand for medical insurance in Dubai.
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