SINGAPORE--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Dhipaya Insurance Company Limited (Dhipaya) (Thailand).
These Credit Ratings (ratings) reflect Dhipaya’s balance sheet strength, which AM Best categorises as strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The negative outlooks reflect AM Best’s expectation of an increasingly challenging operating environment for Dhipaya over the near to medium term, caused by the prevailing COVID-19 pandemic. AM Best expects this environment to drive heightened pressure and potential volatility on Dhipaya’s operating performance and balance sheet strength fundamentals.
Dhipaya’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), was at the strongest level as of December 2019, underpinned by the company’s good liquidity and strong internal capital generation. However, a notable amount of investment assets are placed in higher risk classes such as equities and unit trusts. During the first quarter of 2020, the company recorded a material decline (15%) in its capital and surplus position, largely due to significant unrealised losses in Dhipaya’s equity investment and unit trust portfolio, as well as its dividend payout. As a result, the company’s risk-adjusted capitalisation has deteriorated and remains sensitive to further market volatility or potential deterioration in the credit quality of the company’s bond investment portfolio amid the COVID-19 economic slowdown.
The company’s operating performance remains strong with a favourable five-year average (2015-2019) combined ratio and operating ratio of 80% and 69%, respectively. Robust underwriting profits were supported by strong results in accident and health, fire and industrial all risk lines of business. However, the economic slowdown and potential escalation of COVID-19 cases may negatively impact the company’s underwriting and operating results (including unrealised gains and losses).
AM Best continues to closely monitor the effects of the COVID-19 pandemic and any impact on the rating fundamentals of Dhipaya.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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