HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of DTRIC Insurance Company, Limited (DTRIC), and its reinsured affiliate, DTRIC Insurance Underwriters, Limited. The outlook of these Credit Ratings (ratings) is stable. Both companies are domiciled in Honolulu, HI.
The ratings reflect DTRIC’s balance sheet strength, which AM Best categorises as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management. The ratings also consider the impact of implicit and explicit support given by Aioi Nissay Dowa Insurance Company Limited, a member of MS&AD Insurance Group Holdings, Inc., to DTRIC. Aioi Nissay Dowa Insurance Company Limited has a FSR of A+ (Superior) and has a Financial Size Category of XV ($2 billion or greater).
AM Best’s assessment of DTRIC’s balance sheet strength as strong is attributed to its strong levels of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR). Also reflected in the company’s balance sheet strength assessment is DTRIC’s high quality of capital, strong liquidity and high quality reinsurance panel.
In terms of operating performance, DTRIC has consistently produced positive net income over the past three years, but most of its key operating metrics have continued to lag its peers’ averages. For fiscal year 2019, the company’s underwriting losses increased, owing primarily to a change in the ceding arrangement for certain Japanese interest abroad business, which led to a three-percentage point increase in its expense ratio. As a result, the company’s FY 2019 combined ratio increased to 104.0% from 101.5% in the prior year.
DTRIC mainly specialises in underwriting workers’ compensation, personal automobile insurance and a number of other commercial line products in Hawaii; and the company holds an overall market share of less than 3%. Although there is no significant concentration in its product mix, its narrow geographic focus is a major factor that has constrained DTRIC’s business profile assessment.
The stable outlooks reflect AM Best’s expectation that DTRIC will maintain positive operating results over the short to medium term, supported by stable revenue growth and a combined ratio that AM Best expects to improve gradually over time.
Negative rating actions could occur if there is significant deterioration in DTRIC’s risk-adjusted capitalisation due to unexpected capital repatriation, or if its profitability falls below AM Best’s expectation due to competitive pressure or adverse claims experience.
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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