LONDON--(BUSINESS WIRE)--A.M. Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” of Dubai National Insurance & Reinsurance P.S.C. (DNIR) (United Arab Emirates).
The ratings reflect DNIR’s balance sheet strength, which A.M. Best categorises as very strong, as well as its strong operating performance, limited business profile and marginal enterprise risk management (ERM).
The positive outlooks reflect DNIR’s efforts to strengthen its ERM capabilities and framework substantially in recent years, implementing tools to identify and quantify key risks. In tandem, DNIR’s overall governance and risk culture has also improved materially. Further anticipated improvements will likely lead to an ERM framework that is appropriate for the scale and complexity of DNIR’s operations.
The company maintains balance sheet strength that is underpinned by risk-adjusted capitalisation at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Risk-adjusted capitalisation benefits from low underwriting leverage and high levels of liquidity. A.M. Best expects prospective risk-adjusted capitalisation to remain strong, supported by good internal capital generation and controlled underwriting growth. Although capital consumption is driven largely by investment risk stemming from the company’s concentrated exposure to volatile equity and real estate investments, A.M. Best believes that DNIR’s relative large capital buffers provide some cushion against potential fluctuations. The balance sheet strength assessment also factors in the company’s relatively high dependence on reinsurance. However, the associated elevated counter-party risk is partially mitigated by the use of a well-rated reinsurance panel.
The company is a mid-tier insurer in the UAE insurance market with a track record of excellent profitability, reporting a net profit of AED 50.1 million (USD 13.6 million) in 2017, compared with AED 46 million (USD 12.5 million) in 2016. DNIR’s underwriting operations have generated an excellent five-year weighted average combined ratio of 86% (2013-2017). DNIR has maintained consistent underwriting performance despite prevailing competitive market conditions in the UAE. A.M. Best expects DNIR’s prudent approach to risk selection and focus on profitability over top-line growth to support the continued generation of strong underwriting returns. Interim results for 2018 continue to demonstrate the company’s strong technical earnings.
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